U.S. Securities and Exchange Commission

Washington, D.C. 20549





FORM 10-K/A

Amendment No. 1





|[X] | Annual Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2009
|--- | --------------------------------------------------------------------------------------------------------------------------



|[  ] | Transition Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 for the Transition Period from _______ to _______
|---- | ------------------------------------------------------------------------------------------------------------------------------------





Commission File Number: 1-10559





CHINA FRUITS CORP.

(Exact name of small business issuer as specified
in its charter)





|Nevada                          | 58-2027283                       
|------------------------------- | ---------------------------------
|(State or other jurisdiction of | (IRS Employer Identification No.)
|incorporation or organization)  |                                  



Fu Xi Technology & Industry Park, Nan
Feng County

Jiang Xi Province, P. R. China

(Address of principal executive offices)



(86794) 326-6199

(Issuer's telephone number)







Securities registered under Section 12(b)
of the Act:



|Title of each class |  | Name of each exchange
        on which registered
|------------------- |  | -------------------------------------------------
|                    |  |                                                  
|None                |  | Not Applicable                                   



Securities registered under Section 12(g)
of the Exchange Act:



Common Stock, $.001 par value

(Title of Class)





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Indicate by check mark if the registrant is
a well-know seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [x]



Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] ;No [x]



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

Yes [x] ;No [ ]



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or such shorter period
that the registrant was required to submit and post such files).

Yes [ ] ;No [ ]



Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (229.405 of this Chapter) is not contained herein, and will not be contained, to
the best of the registrant’s knowledge, in definitive proxy of information statements incorporated by reference in Part III
of this Form 10-K or any amendments to this Form 10-K.

Yes [ ];No [x]

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of
“large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.

|Large accelerated filer   | £                                              
|------------------------- | -----------------------------------------------
|Non-accelerated filer     | £ (Do not check if a smaller reporting company)
|Accelerated filer         | £                                              
|Smaller reporting company | S                                              



Indicate by check mark whether the registrant
is a shell company (as defined in rule 12b-2 of the exchange act).

Yes [ ] ; No [X]



The Registrant’s revenues for its fiscal
year ended December 31, 2009 were $1,905,030.



The aggregate market value of the voting stock
on April 8, 2010 (consisting of Common Stock, $0.001 par value per share) held by non-affiliates was approximately $2,118,000 based
upon the most recent sales price ($0.056) for such Common Stock on said date April 8, 2010, there were 38,779,689 shares of our
Common Stock issued and outstanding, of which approximately 37,821,424 shares were held by non-affiliates.



Number of shares of common stock, par value
$.001, outstanding as of April 8, 2010: 38,779,689

Number of shares of preferred stock outstanding as of April
8, 2010:

Series A, par value $.001 -  13,150

Series B, par value $.001 - 12,100,000



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DOCUMENTS INCORPORATED BY REFERENCE



None







EXPLANATORY NOTE



This Annual Report on Form 10-K/A is being
filed as Amendment No. 1 to our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2009.  The Form
10-K was originally filed with the Securities and Exchange Commission on April 15, 2010.



On April 15, 2011, our management concluded
that the audited consolidated financial statements for the fiscal year ended December 31, 2009 could no longer be relied upon
due to improper presentation in the consolidated statements of operations and the consolidated statements of cash flows regarding
the issues from discontinued operations. Specifically, the expenses from discontinued operation should not be within the
operating expenses from continued operation for the year ended December 31, 2009 according to ASC 205-20, Discontinued Operations,
and cash flows from operating, investing and financing activities of the discontinued operations should not be within the operating
cash flow category for the year ended December 31, 2009 according to ASC 230, Statement of Cash Flows. On April 28 2011, we filed
a Current Report on Form 8-K disclosing the need to restate our financials and the reasons for the restatement.



In addition, this Amendment No. 1 is being
filed to incorporate certain changes to our financial statements and corresponding amendments to the Item entitled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”





CAUTIONARY STATEMENT REGARDING FORWARD LOOKING
INFORMATION



The discussion contained in this 10-K/A under
the Securities Exchange Act of 1934, as amended, contains forward-looking statements that involve risks and uncertainties. The
issuer's actual results could differ significantly from those discussed herein. These include statements about our expectations,
beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect,"
"intend," "plan," "will," "we believe," "the Company believes," "management
believes" and similar language, including those set forth in the discussions under "Notes to Financial Statements"
and "Management's Discussion and Analysis or Plan of Operation" as well as those discussed elsewhere in this Form 10-K/A.
We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. Statements
contained in this Form 10-K/A that are not historical facts are forward-looking statements that are subject to the "safe harbor"
created by the Private Securities Litigation Reform Act of 1995.



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TABLE OF CONTENTS



|PART I:                                                                                                                               |  |  |   
|------------------------------------------------------------------------------------------------------------------------------------- |  |  | --
|                                                                                                                                      |  |  |   
|Item 1.                  Business                                                                                                     |  |  | 5 
|Item 1A.               Risk Factors                                                                                                   |  |  | 9 
|Item 1B.               Unresolved Staff Comments                                                                                      |  |  | 14
|Item 2.                  Properties                                                                                                   |  |  | 14
|Item 3.                  Legal Proceedings                                                                                            |  |  | 14
|Item 4.                  Submission of Matters to a Vote of Security Holders                                                          |  |  | 14
|                                                                                                                                      |  |  |   
|PART II:                                                                                                                              |  |  |   
|                                                                                                                                      |  |  |   
|Item 5.                  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  |  | 14
|Item 6.                  Selected Financial Data                                                                                      |  |  | 17
|Item 7.                  Management’s Discussion and Analysis of Financial Condition and Results of Operations                        |  |  | 17
|Item 7A.               Quantitative and Qualitative Disclosures About Market Risk                                                     |  |  | 20
|Item 8.                  Financial Statements and Supplementary Data                                                                  |  |  | 21
|Item 9.                  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  |  | 39
|Item 9A.               Controls and Procedures                                                                                        |  |  | 39
|Item 9A(T).          Controls and Procedures                                                                                          |  |  | 40
|Item 9B.               Other Information                                                                                              |  |  | 40
|                                                                                                                                      |  |  |   
|PART III:                                                                                                                             |  |  |   
|                                                                                                                                      |  |  |   
|Item 10.                Directors, Executive Officers and Corporate Governance                                                        |  |  | 41
|Item 11.                Executive Compensation                                                                                        |  |  | 42
|Item 12.                Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                |  |  | 43
|Item 13.                Certain Relationships and Related Transactions, and Director Independence                                     |  |  | 44
|Item 14.                Principal Accounting Fees and Services                                                                        |  |  | 44
|                                                                                                                                      |  |  |   
|PART IV:                                                                                                                              |  |  |   
|                                                                                                                                      |  |  |   
|Item 15.                Exhibits, Financial Statement Schedules                                                                       |  |  | 45
|                                                                                                                                      |  |  |   
|SIGNATURES:                                                                                                                           |  |  | 46





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ITEM 1. BUSINESS



History



As used herein the terms "We", the
"Company", "CHFR", the "Registrant," or the "Issuer" refers to China Fruits Corporation,
its subsidiary and predecessors, unless indicated otherwise. We were incorporated in the State of Delaware on January 6, 1993,
as Vaxcel, Inc. On December 19, 2000, we changed our name to eLocity Networks Corporation. On August 6, 2002, we changed our name
to Diversified Financial Resources Corporation. In May 2006, our board decided to redomicile from the State of Delaware to the
State of Nevada. Their decision was approved by the holders of a majority of the voting rights and common stock. On August 18,
2006, we changed our name to China Fruits Corporation.



We began operating as a holding company in
2005. The primary objectives involved creating and managing a comprehensive portfolio of companies in key industry sectors. We
did not meet our primary objectives in 2005.  As a result, during 2005 we decided to try and sell all of our real estate
properties, and discontinued the operations of all of our subsidiaries. In the first quarter of 2006, our operations from continuing
activities consisted of its investment in an oil and gas property in Texas, which was disposed during the second quarter of 2006.



As of April 1, 2006, we entered into a Plan
of Exchange (the “Agreement”), between and among us, Jiang Xi Tai Na Guo Ye You Xian Gong Si, a corporation organized
and existing under the laws of the Peoples’ Republic of China, which changed its corporate name to Jiangxi Taina Nanfeng Orange
Co., Ltd. in February of 2007 (collectively referred to herein as “Tai Na”), the shareholders of Tai Na (the “Tai
Na Shareholders”) and our Majority Shareholder.



Pursuant to the terms of the Agreement, two
simultaneous transactions were consummated at closing, as follows: (i) our Majority Shareholder delivered 13,150 of our convertible
Series A preferred shares and 12,100,000 non-convertible Series B preferred shares to the Tai Na Shareholders in exchange for total
payments of $500,000 in cash and (ii) we issued to the Tai Na Shareholders an amount equal to 30,000,000 new investment shares
of our common stock pursuant to Regulation S under the Securities Act of 1933, as amended, in exchange for all of their shares
of registered capital of Tai Na. Upon completion of the exchange, Tai Na became our wholly-owned subsidiary. All of these conditions
to closing have been met, and we, Tai Na, the Tai Na Shareholders and our Majority Shareholders declared the exchange transaction
consummated on May 31, 2006. The transaction was treated for accounting purposes as a capital transaction and recapitalization
by the accounting acquirer and as a re-organization by the accounting acquiree.



Business Description of the Issuer



Since the reverse merger was consummated, we
have continued operations of Tai Na, a company which is principally engaged in manufacturing, trading and distributing fresh tangerine,
non-alcoholic and alcoholic beverages in the PRC. Tai Na is located in Nan Feng County, Jiang Xi Province, the well known agricultural
area for tangerine in China. The geographic advantage benefits us with respect to the control of manufacturing cost and product
quality. We have two self-owned one-storey plants at the same location, total area of which is approximately 45,800 square feet.
We expect the production capacity will reach 6,000 tons in 2008. In order to assist in further expansion in the tangerine markets,
we acquired the assets of Royal Nan Feng Orange Science & Technology Co., Ltd. ("Royal"), our former tangerine supplier,
in 2007. The transaction was completed in July of 2008. As of September 30, 2008, the assets acquired from Royal included equipment
of approximately $290,000, building of approximately $535,000 and land of approximately $368,000. During the three months ended
September 30, 2008, we acquired additional building of approximately $151,000 from Royal.



In 2008, we expanded our sales network by setting
up the franchise retail stores for fresh fruits and related products. We also relocated our headquarters to Beijing, which we believe
will have a positive effect on our corporate image and marketing strategy. In order to create our brand identity efficiently, we
plan to acquire or joint venture with the existing profitable and middle-size retail stores. We will provide the stores with management,
supplies, as well as the remodeling in connection with display, color and sign to match the franchise requirements. The first franchise
store was opened in Beijing in November of 2007. It is our biggest store with approximately 4,200 square feet and independent warehouse
of approximately 1,200 square feet, which is located at the main street business center of He Ping Li, one of the busy areas in
Beijing. As of December 31, 2009, there were three wholly-owned franchise retail stores opened, two of which located in Beijing
and one located in Dongguan, southern China. Some franchise stores were discontinued in 2009 due to the global financial crisis.
We believe the decrease in the number of franchise stores in the current economy is necessary for us to control our cost and enhance
our operating efficiency.



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The franchise retail stores build up the direct
channel between the end users and us, which will facilitate the process from our plants to the markets, benefit us in adjusting
our business strategies when market changes. In addition to our own products, we also work with our strategic partners to diversify
the fruits in our store and ensure the prompt delivery. Even though we are currently suffering economic downturn, we still believe
franchise retail stores will benefit us in business expansion. We expect more market shares via brand recognition in the near future.



In addition, in order to focus on the development
of our fruit franchising business and establish a Nanfeng Tangerine Industrial Center, we have decided to discontinue our alcoholic
beverage production business.  Management has decided that in China, alcoholic beverage production is a saturated
business with limited growth potential.  As a result, on June 8, 2009, we entered into an Equipment and Inventory
Sales Agreement (the “Agreement”) with Nanfeng Huaxia Wuqiannian Ecological Wine Village Ltd., a corporation organized
and existing under the laws of the Peoples’ Republic of China (“Huaxia”), pursuant to which we have agreed to
sell all of its equipment in connection with alcoholic beverage production (the “Equipment”) and the inventory
of alcoholic beverage (the "Inventory") to Huaxia in exchange for a payment of approximately $450,000 (RMB 3,080,000).
The payments were paid in full by Huaxia on August 31, 2009.



Overview of Our Market Area



China's citrus industry currently experiences
transition from quantity concentration to quality concentration, from production only to diversified business segments covering
pre-production to post-production. Citrus production in China has the following features:



|v | Changes in Market Shares. Before the 1990s, approximately 70% of total citrus output was tangerine, 20% of the total were oranges. The percentages were changed to 55% for tangerine and 30% for orange in the past decade due to the improved quality of oranges with respect to size, outlook and taste.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|v | Concentration on Chinese Market. Citrus products are primarily marketed in China. Approximately 2% of total citrus products are exported to different countries.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



|v | Increasing Fresh Fruits Consumption. Currently, the average consumption for fresh fruit is 61.4 kg per person per year in the world, of which fruit consumption of 55.4 kg per person per year in the developing countries, and 83.3 kg per person per year in the developed countries. In China, the average fruit consumption is 45.6 kg per person per year, deceased by 18% and 45%, compared to the developing countries and developed countries, respectively. Therefore, the fresh fruit market in China is still growing.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|v | Preference to Fresh Fruits. 95% of citrus products in China are consumed as fresh fruit. Fruit manufacturing is not popular in China, most of which is for export only. In addition, the orange juices on Chinese markets are primarily made from concentrated or non-concentrated juices imported from Brazil and the United States.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In general, citrus output increased tremendously
in China in the past decades due to the increases in orchards. However, compared to the world's market, the citrus industry in
China is undeveloped in terms of quality, output, manufacture and efficiency. There are four barriers in China's citrus industry:
a) small manufacturing magnitude, primarily based on household; b) lack of technology input, primarily based on nature growth;
c) undeveloped commercial systems, particularly in storage and transportation; d) no clear segments in the industry, particular
in household base. It is a long-term goal to rid us of all these barriers. After China entered the World Trade Organization ("WTO"),
the sales channels for citrus products should be more facilitated due to the open markets. In the long run, the export of Chinese
citrus will increase constantly, for both fresh fruits and processed products.



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Marketing Strategies



Seeking for Opportunities to Develop International Markets



Our tangerines, known as "Nan Feng tangerine",
are popular in the market due to the high quality, benefitting from the natural resources in Nan Feng County, which is a well known
agricultural area for tangerines in China. Currently, we primarily market in China and hold a leading position in the Chinese market.
However, this position is challenged since China’s accession to WTO in 2001. We believe the open-market policies will lower
the barriers to entry, both in Chinese markets and global markets. WTO membership brought with it the opportunity to take advantage
of new market access opportunities and new protections now available to China under the rules-based system of the WTO. When China
was a non-member of the WTO, China found that exports were often the subject of discriminatory treatment in overseas markets. In
addition, as a country with a planned economy to one with marketing economy, China often saw its exporting enterprises were subject
to anti-dumping acts. All changed under the protection of WTO. Therefore, we take advantage of the fair markets regulated by WTO
and seek for opportunities to develop international markets.



Creating Franchise for Retail Fruit Stores



Even though we are currently suffering through
an economic downturn, we still believe franchise retail stores will benefit us in our business expansion. We plan to expand our
sales network by setting up more franchise retail stores for fresh fruit and related products when the economy moves upward. In
order to create our brand identity efficiently, we plan to acquire or form joint ventures with the existing profitable and middle-size
retail stores. We will provide the stores with management, supplies, as well as the remodeling in connection with display, color
and sign to match the franchise requirements. The first franchise store was opened in Beijing in November of 2007. The franchise
retail stores will help build a direct channel between the end users and us, which will facilitate the process of moving product
from our plants to the markets, and benefitting us in our business strategies when markets change.





Seeking for Strategic partners



For Nan Feng tangerine, other fresh fruit and
certain related products, we intend to enter into collaborative arrangements with third parties. These collaborations may be necessary
in order for us to:





* Enhance manufacturing
capacities;



* Setup franchise retail stores
in our target markets located in North China, East China and South China;



* Diversify the fresh fruit
sold in the franchise stores;



* Expand the sales network;



* Increase sales revenue;
and



* Successfully build brand
identity.





(i)On August 27, 2008, Tai Na International Fruits (Beijing) Co., Ltd ("Tai Na International")
and Hangzhou Qunfeng Fruit Chain Management Co., Ltd ("Qunfeng") signed a strategic alliance framework agreement. Pursuant
to the agreement, the two parties established a strategic alliance partnership by reaching a preliminary consent on mutual visits
between high-level leaders, a distribution alliance, a franchise store alliance, an authorized regional agent and a reorganization
of franchise stores and distribution centers. The signing of this agreement will facilitate Tai Na International in further exploring
the East China market, expanding market share of its products, increasing brand awareness and achieving management interoperability
and complementary business practices.



(ii)On August 29, 2008, Tai Na International Fruits (Beijing) Co. Ltd. ('Tai Na International')
and the China National Green Food Industrial Limited Company ('Green Industry') signed a letter of intent, pursuant to which, the
two parties reached a preliminary consent on issues such as building a base for place-of-origin fruit, distribution of the base
products in Beijing, store sharing and cooperative operation, as well as the acquisition of certain Green Industry assets by Tai
Na International. This agreement is conducive for Tai Na International to further explore the North China market, expand Tai Na
product's market share and increase its brand awareness, while providing a powerful guarantee for 'Tai Na International' fruits,
which are 'green, pollution-free, organic and healthy.



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Enhancing Manufacture Capacity



The acquisition of Royal is one of our strategies
to enhance manufacturing capacity. Royal has been engaged in the citrus industry since 2002. Subsequent to the acquisition, we
now have an additional two-story plant with total area of 66,003 square feet, and a one-story plant with total area of 9,125 square
feet. In addition, we invested approximately $300,000 in machinery, office equipment, transportation facilities and other equipment,
90% of which is for a fruit wine production line. We also invested approximately $220,000 in two one-story new plants with total
area of 45,800 square feet. The construction was completed in March of 2007. As of December 31, 2007,
the assets acquired from Royal included equipment of approximately $290,000, building of approximately $535,000 and land of approximately
$368,000. We expect to purchase additional assets during 2010.



Increasing Expenses in Marketing



We plan to increase the budget in advertising
to support our franchise retail stores, which will cover our target markets including Beijing - North China, Haining, Hangzhou
- East China, and Dongguang, Humen - South China. In addition, we retain professional consultants to integrate our marketing strategies.
We believe their expertise will benefit us in connection with target markets definition, corporate image, brand identity and media
preference.



Competition



The domestic and international markets for
the citrus industry are intensely competitive and require us to compete against some companies possessing greater financial, marketing
and other resources than ours. In addition, we compete in the nonalcoholic beverages segment of the commercial beverages industry.
The nonalcoholic beverages segment of the commercial beverages industry is highly competitive, consisting of numerous firms. These
include firms that compete in multiple geographic areas as well as firms that are primarily local in their operation. Competitive
products include numerous nonalcoholic sparkling beverages; various water products, including packaged water; juices and nectars;
fruit drinks and dilutables (including syrups and powdered drinks); coffees and teas; energy and sports drinks; and various other
nonalcoholic beverages. These competitive beverages are sold to consumers in both ready-to-drink and not-ready-to-drink form. Competitive
factors impacting our business include pricing, advertising, sales promotions, product innovation, increased efficiency in production
techniques, the introduction of new packaging, new vending and dispensing equipment, and brand/trademark development and protection.



Our competitive strengths include good quality
with a high level of consumer acceptance; a national distribution network; sophisticated marketing capabilities; and a talented
group of dedicated employees. However, we cannot be certain that efforts in marketing will be successful.



Government Regulation



The production, distribution and sale in the
Chinese market of our products are subject to the PRC State Food, Drug, and Cosmetic Act, state consumer protection laws, the Occupational
Safety and Health Act, various environmental statutes; and various other state and local statutes and regulations applicable to
the production, transportation, sale, safety, advertising, labeling and ingredients of such products.



Employees



We have to make a rational allocation and use
of personnel due to the global financial crisis. As of December 31, 2009, we had 46 full-time employees, of which 23 are experienced
franchising management personnel.



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ITEM 1A. RISK FACTORS



In addition to the other information set forth
in this report, you should carefully consider the following factors, which could materially affect our business, financial condition
or future results. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently
known to us or that we currently deems to be immaterial also may materially adversely affect our business, financial condition
or results of operations.



Water scarcity and poor quality could negatively impact our
production costs and capacity



Water is the main ingredient in substantially
all of our beverage products. It is also a limited resource in many parts of the world, facing unprecedented challenges from overexploitation,
increasing pollution and poor management. As demand for water continues to increase in China and as the quality of available water
deteriorates, our system may incur increasing production costs or face capacity constraints which could adversely affect our profitability
or net operating revenues in the long run.



We rely on its strategic partners for a significant portion
of its business. If we are unable to maintain good relationships with its strategic partners, our business could suffer



For Nan Feng tangerine, other fresh fruit and
certain related products, we intend to enter into collaborative arrangements with third parties. These collaborations may be necessary
in order for us to:









* Enhance manufacturing
capacities;



* Setup franchise retail stores
in our target markets located in North China, East China and South China;



* Diversify the fresh fruit
sold in the franchise stores;



* Expand the sales network;



* Increase sales revenue;
and



* Successfully build brand
identity.



We cannot assure that we will be able to enter
into collaborative agreements with partners on terms favorable to us, or at all, and any future agreement may expose us to risks
that our partner might fail to fulfill its obligations and delay commercialization of our products. We also could become involved
in disputes with partners, which could lead to delays in or terminations of our development and commercialization programs and
time consuming and expensive litigation or arbitration. Our inability to enter into additional collaborative arrangements with
other partners, or our failure to maintain such arrangements, would limit the number of product candidates which we could develop
and ultimately, decrease our sources of any future revenues.



Increase in cost, disruption of supply or shortage of raw
materials could harm our business.



The output of tangerine significantly relies
on the local climate. The shortage of tangerine would increase our operating costs and could reduce our profitability. Increases
in the prices of our finished products resulting from higher raw material costs could affect affordability in some markets and
reduce our sales. An increase in the cost or a sustained interruption in the supply or shortage of the tangerine that may be caused
by natural disasters could negatively impact our net revenues and profits.



Adverse weather conditions could reduce the demand for our
products.



The sales of our products are influenced to
some extent by weather conditions in the markets in which we operate. Unusually cold weather during the summer months may have
a temporary effect on the demand for our products and contribute to lower sales, which could have an adverse effect on our results
of operations for those periods.



If we are unable to maintain brand identity and product quality,
our business may suffer.



Our success depends on our ability to maintain
brand identity for our "Nan Feng Tangerine". We cannot assure you, however, that additional expenditures and our renewed
commitment to advertising and marketing will have the desired impact on our products' brand image and on consumer preferences.
Product quality issues, real or imagined, or allegations of product contamination, could tarnish the image of the affected brands
and may cause consumers to choose other products.



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Changes in accounting standards and taxation
requirements could affect our financial results.



New accounting standards or pronouncements
that may become applicable to us from time to time, or changes in the interpretation of existing standards and pronouncements,
could have a significant effect on our reported results for the affected periods. We are also subject to income tax in China in
which we generate net operating revenues. In addition, our products are subject to sales and value-added taxes in China. Increases
in income tax rates could reduce our after-tax income from affected jurisdictions, while increases in indirect taxes could affect
our products' affordability and therefore reduce demand for our products.



If we are not able to achieve our overall
long term goals, the value of an investment in us could be negatively affected.



We have established and publicly announced
certain long-term growth objectives. These objectives were based on our evaluation of our growth prospects, which are generally
based on the increase in our investment, and on an assessment of potential level or mix of product sales. There can be no assurance
that we will achieve the required volume or revenue growth or mix of products necessary to achieve our growth objectives.



Our assets are located in China and its
revenues are derived from its operations in China



In terms of industry regulations and policies,
the economy of China has been transitioning from a planned economy to market oriented economy. Although in recent years the Chinese
government has implemented measures emphasizing the utilization of market forces for economic reforms, the reduction of state ownership
of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive
assets in China are still owned by the Chinese government. For example, all lands are state owned and are leased to business entities
or individuals through governmental granting of State-owned Land Use Rights. The granting process is typically based on government
policies at the time of granting and it could be lengthy and complex. This process may adversely affect our future manufacturing
expansions. The Chinese government also exercises significant control over China’s economic growth through the allocation
of resources, controlling payment of foreign currency and providing preferential treatment to particular industries or companies.
Uncertainties may arise with changing of governmental policies and measures. At present, our development of research and development
technologies and products is subject to approvals from the relevant government authorities in China. Such governmental approval
processes are typically lengthy and complex, and never certain to be obtained.



Political and economic risks



China is a developing country with a young
market economic system overshadowed by the state. Its political and economic systems are very different from the more developed
countries and are still in the stage of change. China also faces many social, economic and political challenges that may produce
major shocks and instabilities and even crises, in both its domestic arena and in its relationship with other countries, including
but not limited to the United States. Such shocks, instabilities and crises may in turn significantly and adversely affect our
performance.



Risks related to interpretation of China laws and regulations
which involves significant uncertainties



China’s legal system is based on written
statutes and their interpretation by the Supreme People’s Court. Prior court decisions may be cited for reference but have
limited value as precedents. Since 1979, the Chinese government has been developing a comprehensive system of commercial laws,
and considerable progress has been made in introducing laws and regulations dealing with economic matters such as foreign investment,
corporate organization and governance, commerce, taxation and trade. However, because these laws and regulations are relatively
new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation
and enforcement of these laws and regulations involve significant uncertainties. In addition, as the Chinese legal system develops,
we cannot assure that changes in such laws and regulations, and their interpretation or their enforcement will not have a material
adverse effect on our business operations.



Fluctuations in the exchange rate could have a material adverse
effect upon our business.



We conduct our business in the Renminbi. The
value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes
in political and economic conditions. On July 21, 2005, the PRC government changed its decade old policy of pegging its currency
to the U.S. currency. Under the current policy, the Renminbi is permitted to fluctuate within a narrow and managed band against
a basket of certain foreign currencies. This change in policy has resulted in an approximately 6.5% appreciation of the Renminbi
against the U.S. dollar between July 21, 2005 and August 31, 2007. However, there remains significant international pressure
on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation
of the RMB against the U.S. dollar. To the extent our future revenues are denominated in currencies other the United States dollars,
we would be subject to increased risks relating to foreign currency exchange rate fluctuations which could have a material adverse
affect on our financial condition and operating results since our operating results are reported in United States dollars and significant
changes in the exchange rate could materially impact our reported earnings.



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Declining economic conditions could negatively impact our
business



Our operations are affected
by local, national and worldwide economic conditions.  Markets in the United States and elsewhere have been experiencing
extreme volatility and disruption for more than 12 months, due in part to the financial stresses affecting the liquidity of the
banking system and the financial markets generally.  In recent weeks, this volatility and disruption has reached unprecedented
levels.  The consequences of a potential or prolonged recession may include a lower level of economic activity and uncertainty
regarding energy prices and the capital and commodity markets. While the ultimate outcome and impact of the current economic conditions
cannot be predicted, a lower level of economic activity might result in a decline in energy consumption, which may adversely affect
the price of oil, liquidity and future growth.  Instability in the financial markets, as a result of recession or otherwise,
also may affect the cost of capital and our ability to raise capital.



You may experience difficulties in effecting
service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign
laws against us, our management or the experts named in this current report.



We conduct substantially
all of our operations in China and substantially all of our assets are located in China. In addition, most of our senior executive
officers reside within China. As a result, it may not be possible to effect service of process within the United States or elsewhere
outside of China upon our senior executive officers, including with respect to matters arising under U.S. federal securities laws
or applicable state securities laws. Moreover, our PRC counsel has advised us that the PRC does not have treaties with the United
States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts.





We face risks related to health epidemics
and other outbreaks.



Our business
could be adversely affected by the effects of SARS or another epidemic or outbreak. China reported a number of cases of SARS in
April 2004. Any prolonged recurrence of SARS or other adverse public health developments in China may have a material adverse effect
on our business operations. For instance, health or other government regulations adopted in response may require temporary closure
of our production facilities or of our offices. Such closures would severely disrupt our business operations and adversely affect
our results of operations. We have not adopted any written preventive measures or contingency plans to combat any future outbreak
of SARS or any other epidemic.



To date, we have not paid any cash dividends
and no cash dividends will be paid in the foreseeable future.



We do not anticipate paying
cash dividends on our common stock in the foreseeable future and we may not have sufficient funds legally available to pay dividends.
Even if the funds are legally available for distribution, we may nevertheless decide not to pay any dividends. We intend to retain
all earnings from our operations.



The application of the "penny stock"
rules could adversely affect the market price of our common stock and increase your transaction costs to sell those shares.



As long as the trading
price of our common shares is below $5 per share, the open-market trading of our common shares will be subject to the "penny
stock" rules. The "penny stock" rules impose additional sales practice requirements on broker-dealers who sell securities
to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must
make a special suitability determination for the purchase of securities and have received the purchaser's written consent to the
transaction before the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the broker-dealer must
deliver, before the transaction, a disclosure schedule prescribed by the Securities and Exchange Commission relating to the penny
stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative
and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the
limited market in penny stocks. These additional burdens imposed on broker-dealers may restrict the ability or decrease the willingness
of broker-dealers to sell our common shares, and may result in decreased liquidity for our common shares and increased transaction
costs for sales and purchases of our common shares as compared to other securities.



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Our common shares are thinly traded and,
you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to
liquidate your shares.



Our common shares have
historically been sporadically or "thinly-traded" on the “Over-the-Counter Bulletin Board”, meaning that
the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small
or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is
relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate
or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be
reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we
became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will
generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or
more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.



The market price for our
common stock is particularly volatile given our status as a relatively small company with a small and thinly traded “float”
and lack of current revenues that could lead to wide fluctuations in our share price. The price at which you purchase our common
stock may not be indicative of the price that will prevail in the trading market. You may be unable to sell your common stock at
or above your purchase price if at all, which may result in substantial losses to you.



The market for our common
shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable
to a number of factors. First, as noted above, our common shares are sporadically and/or thinly traded. As a consequence of this
lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that
a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which
could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or "risky"
investment due to our lack of revenues or profits to date and uncertainty of future market acceptance for our current and potential
products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their
investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly
and at greater discounts than would be the case with the stock of a seasoned issuer. The following factors may add to the volatility
in the price of our common shares: actual or anticipated variations in our quarterly or annual operating results; adverse outcomes,
additions or departures of our key personnel, as well as other items discussed under this "Risk Factors" section, as
well as elsewhere in this Current Report. Many of these factors are beyond our control and may decrease the market price of our
common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing
market price for our common shares will be at any time, including as to whether our common shares will sustain their current market
prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the
prevailing market price.



Shareholders should be
aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud
and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related
to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading
press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale
dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with
the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that
have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of
the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.



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Volatility in our common share price
may subject us to securities litigation.



The market for our common
stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities
class action litigation against a company following periods of volatility in the market price of its securities. We may, in the
future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could
divert management's attention and resources.



Our corporate actions are substantially
controlled by a single stockholder.



Chen, Quan Long currently
owns approximately 100% of our outstanding Series A and B Preferred shares, representing a majority of our voting power. This stockholder
could exert substantial influence over matters such as electing directors and approving mergers or other business combination transactions.
In addition, because of the percentage of ownership and voting concentration in the principal stockholder, elections of our board
of directors will generally be within the control of this stockholder. While all of our shareholders are entitled to vote on matters
submitted to our shareholders for approval, the concentration of shares and voting control presently lies with this principal stockholder.
As such, it would be extremely difficult for shareholders to propose and have approved proposals not supported by the Chen, Quan
Long. There can be no assurances that matters voted upon by the Chen, Quan Long will be viewed favorably by all shareholders of
our company.



We may need additional capital, and the
sale of additional shares or other equity securities could result in additional dilution to our shareholders.



We may require additional
cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may
decide to pursue. If our resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or
debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our
shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and
financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on
terms acceptable to us, if at all.



PRC laws and regulations governing our
business are uncertain. If we are found to be in violation, we could be subject to sanctions. In addition, changes in such PRC
laws and regulations may materially and adversely affect our business.



There are substantial uncertainties
regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations
governing our business. We are considered a foreign person or foreign invested enterprise under PRC law. As a result, we are subject
to PRC law limitations on foreign ownership of Chinese companies. These laws and regulations are relatively new and may be subject
to change, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted
laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations
that affect existing and proposed future businesses may also be applied retroactively.



The PRC government has
broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses
and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us by relevant governmental
bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpretation of existing
or new PRC laws or regulations on our businesses. We cannot assure you that our current ownership and operating structure would
not be found in violation of any current or future PRC laws or regulations. As a result, we may be subject to sanctions, including
fines, and could be required to restructure our operations or cease to provide certain services. Any of these or similar actions
could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations,
which could materially and adversely affect our business, financial condition and results of operations.



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ITEM 1B. UNRESOLVED STAFF COMMENTS



None.



ITEM 2. PROPERTIES



Our main operation is located in the Fu Xi
Technology & Industry Park, Nan Feng County, Jiang Xi Province, People’s Republic of China, which is self-owned property
with a total area of 120,928 square feet, including the two self-owned one-story plants of approximately 45,800 square feet completed
in March of 2007. This space is adequate for our present operations. No other businesses operate from this office.



There is no private ownership of land in China;
all land ownership is held by the government of China, its agencies and collectives. Land use rights are obtained from government
for periods ranging from 50 to 70 years, and are typically renewable. Land use rights can be transferred upon approval by the land
administrative authorities of China (State Land Administration Bureau) upon payment of the required transfer fee.



ITEM 3. LEGAL PROCEEDINGS



We may be subject to, from time to time, various
legal proceedings relating to claims arising out of our operations in the ordinary course of our business. We are not currently
a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse
effect on the business, financial condition, or results of operations of the Company.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



We did not submit any matters to a vote of
security holders during the fourth quarter of fiscal year 2009.



PART II



ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES



Trading Market for Common Equity



Our common stock is quoted on the Electronic
Bulletin Board under the symbol, CHFR. Trading of our common stock in the over-the-counter market has been limited and sporadic
and the quotations set forth below are not necessarily indicative of actual market conditions. Further, these prices reflect inter-dealer
prices without retail mark-up, mark-down, or commission, and may not necessarily reflect actual transactions. The following tables
set forth the high and low sale prices for our common stock as reported on the Electronic Bulletin Board for the periods indicated.





|Interim Period                      |  | Low |       | High
|----------------------------------- |  | --- | ----- | ----
|                                    |  |     |       |     
|Interim period ended March 31, 2010 |  | $   | 0.055 |     









|Fiscal 2009                      |  | Low |      | High
|-------------------------------- |  | --- | ---- | ----
|                                 |  |     |      |     
|Quarter ended March 31, 2009     |  | $   | 0.04 |     
|Quarter ended June 30, 2009      |  | $   | 0.06 |     
|Quarter ended September 30, 2009 |  | $   | 0.07 |     
|Quarter ended December 31, 2009  |  | $   | 0.05 |     



|Fiscal 2008                      |  | Low |      | High
|-------------------------------- |  | --- | ---- | ----
|                                 |  |     |      |     
|Quarter ended March 31, 2008     |  | $   | 0.04 |     
|Quarter ended June 30, 2008      |  | $   | 0.02 |     
|Quarter ended September 30, 2008 |  | $   | 0.04 |     
|Quarter ended December 31, 2008  |  | $   | 0.05 |     





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Dividends



We have never paid a cash dividend on our common
stock. The payment of dividends may be made at the discretion of our Board of Directors, and will depend upon, among other things,
our operations, capital requirements, and overall financial condition. There are no contractual restrictions on our ability to
declare and pay dividends.



Preferred Stock



On September 16, 2004, we filed with the Delaware
Secretary of State a Certificate of Designation of the Rights and Preferences of Preferred Stock of Diversified Financial Resources
Corporation, n/k/a China Fruits Corporation. This designation created 200,000,000 shares, no stated par value, of Series A and
Series B Convertible Preferred Stock. On May 18, 2006, we filed with the Nevada Secretary of State an Articles of Exchange
to redomicile from Delaware State to Nevada State, the designation regarding the Rights and Preferences of Preferred Stock remains
unchanged except that the par value of Preferred Stock was changed to $.001.



The Series A Convertible Preferred Stock has the following rights
and privileges:



|1. |  | The shares are convertible
at the option of the holder at any time into common shares, at a conversion rate of one share of Series
A Convertible Preferred Stock for 100 shares of common stock for a period of 10 years from the issuance
date.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2. |  | Requires two-thirds
voting majority to authorize changes to equity.
|-- |  | -------------------------------------------------------------------



|3. |  | Redemption provision
at option of directors for $10 per share plus the greater of $3 per share or 50% of market capitalization
divided by 2,000,000.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | The holders of the
shares are entitled to one hundred (100) votes for each share held.
|-- |  | --------------------------------------------------------------------------------------



|5. |  | Upon our liquidation,
the holders of the shares will be entitled to receive $10 per share plus redemption provision before
assets distributed to other shareholders.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The holders of the
shares are entitled to dividends equal to common share dividends.
|-- |  | ------------------------------------------------------------------------------------



The Series B Convertible Preferred Stock has the following rights
and privileges:



|1. |  | The shares are not
convertible into any other class or series of stock.
|-- |  | -----------------------------------------------------------------------



|2. |  | The holders of the
shares are entitled to five hundred (500) votes for each share held. Voting rights are not subject to
adjustment for splits that increase or decrease the common shares outstanding.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Upon our liquidation,
the holders of the shares will be entitled to receive $.001 per share plus redemption provision before
assets distributed to other shareholders.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | The holders of the
shares are entitled to dividends equal to common share dividends.
|-- |  | ------------------------------------------------------------------------------------



|5. |  | Once any shares of
Series B Convertible Preferred Stock are outstanding, at least two-thirds of the total number of shares
of Series B Convertible Preferred Stock outstanding must approve the following transactions:
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|a) |  | Alter or change the
rights, preferences or privileges of the Series B Preferred Stock.
|-- |  | --------------------------------------------------------------------------------------

|b) |  | Create any new class
of stock having preferences over the Series B Preferred Stock.
|-- |  | -----------------------------------------------------------------------------------

|c) |  | Repurchase any of our
common stock.
|-- |  | -----------------------------------

|d) |  | Merge or consolidate
with any other company, except our wholly-owned subsidiaries.
|-- |  | ----------------------------------------------------------------------------------

|e) |  | Sell, convey or otherwise
dispose of, or create or incur any mortgage, lien, or charge or encumbrance or security interest in or
pledge of, or sell and leaseback, in all or substantially all of our property or business.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|f) |  | Incur, assume or guarantee
any indebtedness maturing more than 18 months after the date on which it is incurred, assumed or guaranteed
by us, except for operating leases and obligations assumed as part of the purchase price of property.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Number of Holders



As of April 8, 2010, we had 3,640 common shareholders of record.



Securities Authorized for Issuance Under Equity Compensation
Plans



As of the date of this Report, we have not
authorized any equity compensation plan, nor has our Board of Directors authorized the reservation or issuance of any securities
under any equity compensation plan.



Recent Sales of Unregistered Securities; Use of Proceeds from
Registered Securities



As of May 15th, 2009, the Company
entered into an Offshore Subscription Agreement with Ms. Ning, Fen (“Ms. Ning”), in order to subscribe to and purchase
one million and seven hundred fifty thousand shares (1,750,000) of restricted common stock of CHFR (the “Ning Shares”).
Ms. Ning agreed to purchase the Ning Shares at a purchase price of twenty cents (US$.20) per share (aggregate sum of $350,000)
(the “Purchase Price”).



Pursuant to the Offshore Subscription Agreement,
we issued 1,750,000 common shares to Ms. Ning, Fen at $0.20 per share for an aggregate price of $350,000.  The proceeds
from this offering will be used as the registered capital required under Chinese law to incorporate Tai Na International Fruits
(Bei Jing) Co. Ltd., a subsidiary located in Beijing China.  Please refer to the Current Report on Form 8k filed with
the commission on January 28, 2008 which is hereby incorporated by reference for details on the Beijing subsidiary.  We
relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as amended and Regulation S. We made this offering
based on the following facts: (1) the issuance was an isolated private transaction which did not involve a public offering; (2)
there was only one offeree, (3) the offeree has agreed to the imposition of a restrictive legend on the face of the stock certificate
representing the shares indicating the stock cannot be resold unless registered or an exemption from registration is available;
(4) the offeree was a sophisticated investor familiar with our company and stock-based transactions; (5) there were no subsequent
or contemporaneous public offerings of the stock; (6) the stock was not broken down into smaller denominations; and (7) the negotiations
for the sale of the stock took place directly between the offeree and our management; (8) the sale was made offshore to a Chinese
national.



As of January 12th, 2010, the Company entered
into an Offshore Subscription Agreement with Mr. Huang, Junjie (“Mr. Huang”), in order to subscribe to and purchase
nine hundred thousand shares (900,000) of restricted common stock of CHFR (the “Huang Shares”). Mr. Huang agreed to
purchase the Huang Shares at a purchase price of twenty cents (US$.20) per share (aggregate sum of $180,000).



Pursuant to the Offshore Subscription Agreement,
we issued 900,000 common shares to Mr. Huang, Junjie at $0.20 per share for an aggregate price of $180,000.  We will
use the proceeds from this offering for working capital purposes.  We relied on exemptions provided by Section 4(2) of
the Securities Act of 1933, as amended. We made this offering based on the following facts: (1) the issuance was an isolated private
transaction which did not involve a public offering; (2) there was only one offeree, (3) the offeree has agreed to the imposition
of a restrictive legend on the face of the stock certificate representing the shares indicating the stock cannot be resold unless
registered or an exemption from registration is available; (4) the offeree was a sophisticated investor familiar with our company
and stock-based transactions; (5) there were no subsequent or contemporaneous public offerings of the stock; (6) the stock was
not broken down into smaller denominations; and (7) the negotiations for the sale of the stock took place directly between the
offeree and our management.



Purchases of Equity Securities by the Small Business Issuer
and Affiliated Purchasers



None.



Transfer Agent



Our transfer agent is Guardian Registrar &
Transfer, Inc. located at 7951 SW 6th Street, Suite 216, Plantation, Florida 33324.



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ITEM 6. SELECTED FINANCIAL DATA

If the registrant
qualifies as a smaller reporting company as defined by Rule 229.10(f)(1), it is not required
to provide the information required by this Item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION



Forward Looking Statements



Certain statements in this report, including
statements of our expectations, intentions, plans and beliefs, including those contained in or implied by "Management's Discussion
and Analysis" and the Notes to Consolidated Financial Statements, are "forward-looking statements", within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are subject to certain events,
risks and uncertainties that may be outside our control. The words “believe”, “expect”, “anticipate”,
“optimistic”, “intend”, “will”, and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which
they are made. We undertake no obligation to update or revise any forward-looking statements. These forward-looking statements
include statements of management's plans and objectives for our future operations and statements of future economic performance,
information regarding our expansion and possible results from expansion, our expected growth, our capital budget and future capital
requirements, the availability of funds and our ability to meet future capital needs, the realization of our deferred tax assets,
and the assumptions described in this report underlying such forward-looking statements. Actual results and developments could
differ materially from those expressed in or implied by such statements due to a number of factors, including, without limitation,
those described in the context of such forward-looking statements, our expansion strategy, our ability to achieve operating efficiencies,
our dependence on distributors, capacity, suppliers, industry pricing and industry trends, evolving industry standards, domestic
and international regulatory matters, general economic and business conditions, the strength and financial resources of our competitors,
our ability to find and retain skilled personnel, the political and economic climate in which we conduct operations and the risk
factors described from time to time in our other documents and reports filed with the Securities and Exchange Commission (the "Commission").
Additional factors that could cause actual results to differ materially from the forward-looking statements include, but are not
limited to: 1) our ability to successfully develop and deliver our products on a timely basis and in the prescribed condition;
2) our ability to compete effectively with other companies in the same industry; 3) our ability to raise sufficient capital in
order to effectuate our business plan; and 4) our ability to retain our key executives.



Critical Accounting Policies



Revenue recognition



The Company derives revenues from the resale
of tangerine purchased from third parties, net of value added taxes (“VAT”). The Company is subject to VAT which is
levied on the majority of the products of Tai Na at the rate of 17% on the invoiced value of sales. Output VAT is borne by customers
in addition to the invoiced value of sales and input VAT is borne by the Company in addition to the invoiced value of purchases
to the extent not refunded for export sales.



In accordance with the SEC’s Staff Accounting
Bulletin No. 104, Revenue Recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists,
transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectability is
reasonably assured. The Company’s sales arrangements are not subject to warranty.



Starting from October 2008, the Company commenced
the trading of tangerine in the PRC.





(a) Sale of products



The Company recognizes revenue from the sale
of products upon delivery to the customers and the transfer of title and risk of loss. The Company did not record any product returns
for the year ended December 31, 2009.



(b) Interest income



Interest income is recognized on a time apportionment
basis, taking into account the principal amounts outstanding and the interest rates applicable.



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Inventory



Inventories consist of finished goods and are
valued at lower of cost or market value, cost being determined on the first-in, first-out method. The Company periodically reviews
historical sales activity to determine excess, slow moving items and potentially obsolete items and also evaluates the impact of
any anticipated changes in future demand. The Company provides inventory allowances based on excess and obsolete inventories determined
principally by customer demand. As of December 31, 2009 and 2008, the Company did not record an allowance for obsolete inventories,
nor have there been any write-offs.



Property, Plant, and Equipment



Plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over
the following expected useful lives from the date on which they become fully operational and after taking into account their estimated
residual values:



|                                 | Depreciable life |  | Residual value
|-------------------------------- | ---------------- |  | --------------
|Plant and machinery              | 10-12 years      |  | 5%            
|Furniture, fixture and equipment | 5-6 years        |  | 5%            



Expenditure for maintenance and repairs is
expensed as incurred.





RESULTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 2009 AND 2008



Revenues



Gross revenues were $1,905,030 and $1,655,503
for the years ended December 31, 2009 and 2008, respectively, due primarily to sales of fresh fruits and related products, including
our signature tangerine. Our sales of non-alcoholic and alcoholic beverages ceased in the second quarter of 2009 as a result of
the execution of an Equipment and Inventory Sales Agreement, dated June 8, 2009,  made by us and Nanfeng Huaxia Wuqiannian
Ecological Wine Village Ltd., a corporation organized and existing under the laws of the Peoples’ Republic of China. We recognize
revenue when persuasive evidence of a sale exists, transfer of title has occurred, the selling price is fixed or determinable and
collectability is reasonably assured. Our sales arrangements are not subject to warranty. We did not record any product returns
for the year ended December 31, 2009. The increase in gross revenues by $249,527 in 2009 was due primarily to collaboration with
the strategic partners. We designated exclusive distributors in different regions. For example, Liaoning Shenyang Yunpeng Fruits
Limited ("Yunpeng") is our exclusive distributor within three provinces in Northeast China, through which we sold 2,600
ton tangerines. We expect sales to increase during 2010 as our moves toward implementing our business plan, including the increase
in franchise retail stores, the increase in marketing budgets.



Income / Loss



We had a net loss of $246,361 for the year
ended December 31, 2009, of which net loss of $170,438 from continuing operations, and net loss of $75,923 from non-alcoholic
and alcoholic beverages segment, which was discontinued in the second quarter of 2009. Comparatively, we had net income of 161,902
for the year ended December 31, 2008, of which net income of $79,777 from continuing operations, and net income of $82,125 from
discontinued operations. The net loss in 2009 was because the increase in sales revenues in 2009 was offset by the increase in
cost of goods sold, resulting in approximately the same amount of gross profit as in 2008. However, our general and administrative
expenses in 2009 increased by $199,319, compared to general and administrative expenses of $309,331 in 2008. In addition, the
Government grant decreased to $168,175 in 2009, from 325,088 in 2008.



There can be no assurance that we will achieve
or maintain profitability, or that any revenue growth will take place in the future.



Expenses



Operating expenses for the years ended
December 31, 2009 and 2008 were $880,388 and $780,285, respectively. The increase by $100,103 in 2009 was due primarily to the
increase in selling and marketing and the increase in general and administrative expenses.



Cost of Goods Sold



Cost of goods sold included expenses directly
related to the manufacturing and selling our products. Product delivery and direct labor would be examples of cost of goods sold
items. During the year ended December 31, 2009, we had $1,329,385 in cost of goods sold, or 69.8% of sales revenue, none of which
from related party. During the year ended December 31, 2008, we had $1,123,648 in cost of goods sold, or 67.9% of sales revenue,
of which $0 was from related party. The slightly higher cost of goods sold as a percentage of revenue during 2009 was due to the
increase in our purchase cost. The collaboration with more non-related suppliers will also help us to reduce the risk of concentration.



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Impact of Inflation



We believe that inflation has had a negligible
effect on operations during this period. We believe that we can offset inflationary increases in the cost of sales by increasing
sales and improving operating efficiencies.



Liquidity and Capital Resources



Cash flows used in operating activities
were $176,760 for the year ended December 31, 2009, compared to the cash flows of $31,406 used in operations for the year ended
December 31, 2008. Negative cash flows from operations in 2009 were due primarily to the net loss of $170,438 from continuing
operation, plus the increase in accounts receivable by $38,865, the increase in prepaid expenses and other current assets by $421,018,
and the decrease in other payables and accrued liabilities by $131,107, partially offset by the decrease in inventory by $145,818
and the increase in accounts payable and tax payable, which were $151,736 and $242,408, respectively.



The negative cash flow from operations
during the year ended December 31, 2008 were due primarily to the increase in accounts receivable by $299,612, the increase in
inventories by $179,242, and the decrease in tax payable by $231,807, partially offset by the net income of $79.777 from continuing
operations, plus the non-cash expenses, including depreciation of $179,340, and stock based compensation of $193,750, and the
increase in accrued liabilities in the amount of $267,719.



Cash flows used in investing activities
were $426,438 during the year ended December 31, 2009 due to the purchase of property and equipment in amount of $439,291, offset
by the proceeds from disposal of property and equipments in the amount of $12,853. Comparably, we had cash flows of $409,310 used
in investing activities in 2008 due primarily to the purchase of property and equipment.



Cash flows provided by financing activities
were $496,089 and $425,895 for the years ended December 31, 2009 and 2008, respectively. Cash flows from financing activities in
2009 were due primarily to the third party loans of total $900,676, which consisted of a local bank in total amount of $439,354
(3,000,000RMB) bearing annual interest 5.841% and due on July 20, 2010, and four loans in total amount of $461,322 (3,150,000RMB)
from local government, bearing no interest and paid back before November 30, 2012 and November 30, 2013, respectively. In addition,
we had proceeds of $350,000 from the sales of our common stock, which was priced at $.20 per share.



Cash flows from financing activities in 2008
due primarily to a third party loan of $539,726, plus officer loans of $140,085, which are unsecured, non-interest bearing and
repayable over 12 months. Additionally, we infused $621,965 as additional paid-in capital.



We project that we will need additional capital
to fund operations over the next 12 months. We anticipate we will need an additional $500,000 in working capital during 2010 and
$700,000 for the two years thereafter.



Overall, we have funded our cash needs from
inception through December 31, 2009 with a series of debt and equity transactions, primarily with related parties. If we are unable
to receive additional cash from our related parties, we may need to rely on financing from outside sources through debt or equity
transactions. Our related parties are under no legal obligation to provide us with capital infusions. Failure to obtain such financing
could have a material adverse effect on operations and financial condition.



We had cash of $453,831 on hand and a working
capital of $1,142,379 as of December 31, 2009. Currently, we have enough cash to fund our operations for about six months. This
is based on current cash flows from financing activities and projected revenues. Also, if the projected revenues fall short of
needed capital we may not be able to sustain our capital needs. We will then need to obtain additional capital through equity or
debt financing to sustain operations for an additional year. Our current level of operations would require capital of approximately
$500,000 to sustain operations through year 2010 and approximately $700,000 per year thereafter. Modifications to our business
plans may require additional capital for us to operate. For example, if we are unable to raise additional capital in the future
we may need to curtail our number of product offers or limit our marketing efforts to the most profitable geographical areas. This
may result in lower revenues and market share for us. In addition, there can be no assurance that additional capital will be available
to us when needed or available on terms favorable to us.



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On a long-term basis, liquidity is dependent
on continuation and expansion of operations, receipt of revenues, and additional infusions of capital and debt financing. Our current
capital and revenues are insufficient to fund such expansion. If we choose to launch such an expansion campaign, we will require
substantially more capital. The funds raised from this offering will also be used to market our products and services as well as
expand operations and contribute to working capital. However, there can be no assurance that we will be able to obtain additional
equity or debt financing in the future, if at all. If we are unable to raise additional capital, our growth potential will be adversely
affected and we will have to significantly modify our plans. For example, if we unable to raise sufficient capital to develop our
business plan, we may need to:



• Curtail new product launches



• Limit our future marketing efforts to areas that we believe
would be the most profitable.



Demand for the products and services will be
dependent on, among other things, market acceptance of our products, citrus market and beverage market in general, and general
economic conditions, which are cyclical in nature. Inasmuch as a major portion of our activities is the receipt of revenues from
the sales of our products, our business operations may be adversely affected by our competitors and prolonged recession periods.



Our success will
be dependent upon implementing our plan of operations and the risks associated with our business plans. We manufacture, trade and
distribute fresh fruits, including our signature tangerine, to retail consumers and wholesale buyers. We plan to strengthen our
position in these markets. We also plan to expand our operations through aggressively marketing our products and our concept.



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK



We do not use derivative financial instruments
in our investment portfolio and has no foreign exchange contracts. Our financial instruments consist of cash and cash equivalents,
trade accounts receivable, accounts payable and long-term obligations. We consider investments in highly liquid instruments purchased
with a remaining maturity of 90 days or less at the date of purchase to be cash equivalents. However, in order to manage the foreign
exchange risks, we may engage in hedging activities to manage our financial exposure related to currency exchange fluctuation.
In these hedging activities, we might use fixed-price, forward, futures, financial swaps and option contracts traded in the over-the-counter
markets or on exchanges, as well as long-term structured transactions when feasible.



Foreign Exchange Rates



All of our sales are denominated in Renminbi
(“RMB”). As a result, changes in the relative values of U.S. Dollars and RMB affect our reported levels of revenues
and profitability as the results are translated into U.S. Dollars for reporting purposes. Fluctuations in exchange rates between
the U.S. dollar and RMB affect our gross and net profit margins and could result in foreign exchange and operating losses.



Our results of operations and cash flow are
translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate
as quoted by the People’s Bank of China at the end of the period. Translation adjustments resulting from this process are
included in accumulated other comprehensive income in our statement of shareholders’ equity. We recorded net foreign currency
gains of $9,915 in fiscal 2009. We have not used any forward contracts, currency options or borrowings to hedge our exposure to
foreign currency exchange risk. We cannot predict the impact of future exchange rate fluctuations on our results of operations
and may incur net foreign currency losses in the future.



Our financial statements are expressed in U.S. dollars
but the functional currency of our operating subsidiary is RMB. The value of your investment in our stock will be affected by the
foreign exchange rate between U.S. dollars and RMB. To the extent we hold assets denominated in U.S. dollars, including
the net proceeds to us from this offering, any appreciation of the RMB against the U.S. dollar could result in a change to
our statement of operations and a reduction in the value of our U.S. dollar denominated assets. On the other hand, a decline
in the value of RMB against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results,
the value of your investment in our company and the dividends we may pay in the future, if any, all of which may have a material
adverse effect on the price of our stock.



The exchange rates used to translate amounts
in RMB into U.S. Dollars for the purposes of preparing the consolidated financial statements or otherwise stated in this MD&A
were as follows:



|                                                                                                                                                                         | 2009            |  | 2008            | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------- |  | --------------- | 
|                                                                                                                                                                         |                 |  |                 | 
|Balance sheet items, except for the registered and paid-up capital as of December 31, 2009 and 2008                                                                      | USD 0.146:RMB 1 |  | USD 0.147:RMB 1 | 
|Amounts included in the statement of operations, statement of changes in stockholders’ equity and statement of cash flows for the years ended December 31, 2009 and 2008 | USD 0.146:RMB 1 |  | USD 0.144:RMB 1 | 











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ITEM 8. FINANCIAL STATEMENTS



Financial Summary Information



Because this is only a financial summary, it
does not contain all the financial information that may be important to you. It should be read in conjunction with the consolidated
financial statements and related notes presented in this section.



Audited Financial Summary Information for the Years Ended December
31, 2009 and 2008



|Statements of Operations  |  | For the year ended December 31, 2009 |              |   | For the year ended December 31, 2008 |   |             
|------------------------- |  | ------------------------------------ | ------------ | - | ------------------------------------ | - | ------------
|                          |  |                                      |              |   |                                      |   |             
|Revenues                  |  | $                                    | 1,905,030    |   |                                      | $ | 1,655,503   
|Cost of Sales             |  | $                                    | ( 1,329,385) |   |                                      | $ | ( 1,123,648)
|Gross profit              |  | $                                    | 575,645      |   |                                      | $ | 531,855     
|Operating expenses        |  | $                                    | 880,388      |   |                                      | $ | 780,285     
|(Loss) from operations    |  | $                                    | ( 304,743    | ) |                                      | $ | ( 248,430)  
|Interest expense          |  | $                                    | ( 14,649)    |   |                                      | $ | ( 136)      
|Net income (loss)         |  | $                                    | (246,361)    |   |                                      | $ | 161,902     
|Net loss per common share |  |                                      | **           |   |                                      |   | **          
|                          |  |                                      |              |   |                                      |   |             



** Less than $.01





|Balance Sheet                              |  | As of December 31, 2009 |          
|------------------------------------------ |  | ----------------------- | ---------
|                                           |  |                         |          
|Cash                                       |  | $                       | 453,831  
|Total current assets                       |  | $                       | 2,154,474
|Other assets                               |  | $                       | 15,751   
|Total Assets                               |  | $                       | 4,131,690
|Current liabilities                        |  | $                       | 1,012,095
|Long term liabilities                      |  | $                       | 796,468  
|Stockholders’ equity                       |  | $                       | 2,323,127
|Total liabilities and stockholders’ equity |  | $                       | 4,131,690



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM



To the Board of Directors and
Stockholders of China Fruits Corporation



We have audited the accompanying consolidated
balance sheets of China Fruits Corporation (the “Company”) as of December 31, 2009 and 2008, and related consolidated
statements of operations, stockholders’ deficit, and cash flows for the years ending December 31, 2009 and 2008. These financial
statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial
statements based on our audit.



We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.



In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of China Fruits Corporation as of December
31, 2009 and 2008 and the results of its operations and its cash flows for years ended December 31, 2009 and 2008 in conformity
with accounting principles generally accepted in the United States of America.



The accompanying financial statements have
been prepared assuming the Company will continue as a going concern. As discussed in Note 2, the Company has suffered accumulated
deficit and negative cash flow from operations that raises substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



As discussed in Note 23 to the consolidated
financial statements, the Company has restated its consolidated statement of operation and cash flows for the years ended December
31, 2009 and 2008 related to the presentation of income and cash flows from discontinued operation.



/s/Lake & Associates CPA’s
LLC

Lake & Associates CPA’s LLC

April 12, 2010 except for Note 21 and 23
which are dated as of April 14, 2011





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|CHINA FRUITS CORPORATION                                                                
|----------------------------------------------------------------------------------------
|Audited Consolidated Balance Sheet                                                      
|As of December 31, 2009 and 2008                                                        
|(Expresed in US Dollars, except for number of shares)                                   
|                                                                                        
|ASSETS                                                                                  
|                                                                                        
|CURRENT ASSETS                                                                          
|Cash and cash equivalents                                                               
|Accounts receivable, trade                                                              
|Receivable from third parties                                                           
|Inventories                                                                             
|Prepayment                                                                              
|Employee advance                                                                        
|Refundable VAT tax                                                                      
|Refundable income tax                                                                   
|TOTAL CURRENT ASSETS                                                                    
|                                                                                        
|PLANT AND EQUIPMENT, NET                                                                
|                                                                                        
|OTHER ASSETS                                                                            
|                                                                                        
|                                                                                        
|TOTAL ASSETS                                                                            
|                                                                                        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                    
|                                                                                        
|CURRENT LIABILITIES                                                                     
|Accounts payable                                                                        
|Loan and related party payable                                                          
|Notes payable-current portion                                                           
|Customer deposit                                                                        
|Income Taxes Payable                                                                    
|Accrued liabilities and payroll tax liabilities                                         
|TOTAL CURRENT LIABILITIES                                                               
|                                                                                        
|LONG-TERM LIABILITIES                                                                   
|Note Payable-Long term                                                                  
|Due to stockholders                                                                     
|TOTAL LONG-TERM LIABILITIES                                                             
|                                                                                        
|STOCKHOLDERS' EQUITY                                                                    
|Preferred stock, 200,000,000 shares authorized, designated as Series A and Series B     
|Series A; par value $.001; 2,000,000 shares authorized,                                 
|13,150 shares issued and outstanding                                                    
|Series B; par value $0.001, voting; 50,000,000 shares authorized,                       
|12,100,000 shares issued and outstanding                                                
|Common stock, par value $.001, 100,000,000 shares authorized,                           
|37,879,689 and 36,129,689 shares issued and outstanding                                 
|as of December 31, 2009 and 2008, respectively                                          
|Additional paid-in capital                                                              
|Statutory reserve                                                                       
|Accumulated other comprehensive income (loss)                                           
|Accumulated deficit                                                                     
|TOTAL STOCKHOLDERS' EQUITY                                                              
|                                                                                        
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                              
|                                                                                        
|                                                                                        
|The accompanying notes are an integral part of these  consolidated  financial statements





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|CHINA FRUITS CORPORATION                                                                  
|------------------------------------------------------------------------------------------
|Audited Consolidated Statements of Operations                                             
|For the years ended December 31, 2009 and December
    31, 2008                           
|'(Expresed in US Dollars, except for number of shares)                                    
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|REVENUES:                                                                                 
|Sales                                                                                     
|Cost of goods sold                                                                        
|GROSS PROFIT                                                                              
|                                                                                          
|OPERATING EXPENSES:                                                                       
|Selling and marketing                                                                     
|Professional and legal expenses                                                           
|General and administrative                                                                
|TOTAL OPERATING EXPENSES                                                                  
|                                                                                          
|INCOME(LOSS) FROM CONTINUING OPERATIONS                                                   
|                                                                                          
|OTHER INCOME (EXPENSE):                                                                   
|Interest income                                                                           
|Interest expenses                                                                         
|Gain (loss) on disposal of equipment                                                      
|Government grant                                                                          
|Other                                                                                     
|TOTAL OTHER INCOME (EXPENSES)                                                             
|                                                                                          
|INCOME(LOSS) FROM CONTINUING OPERATIONS BEFOR INCOME TAXES                                
|                                                                                          
|Income tax expense                                                                        
|                                                                                          
|NET INCOME(LOSS) FROM CONTINUING OPERATIONS                                               
|                                                                                          
|NET INCOME(LOSS) FROM DISCONTINUED OPERATIONS                                             
|                                                                                          
|NET INCOME                                                                                
|                                                                                          
|Other comprehensive income                                                                
|- Foreign currency translation gain                                                       
|                                                                                          
|COMPREHENSIVE (LOSS) INCOME                                                               
|                                                                                          
|Earnings(loss) per share:                                                                 
|Continuing operations- basic and diluted                                                  
|                                                                                          
|Discontinued operations- basic and diluted                                                
|                                                                                          
|Weighted average number of shares outstanding during the period - basic
    and diluted   
|                                                                                          
|                                                                                          
|The accompanying notes are an integral part of these consolidated financial
    statements





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|CHINA FRUITS CORPORATION                                                                  
|------------------------------------------------------------------------------------------
|Audited Consolidated Statements of Cash Flows                                             
|For the period ended December 31, 2009 and December 31, 2008                              
|                                                                                          
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                     
|                                                                                          
|                                                                                          
|                                                                                          
|Net income                                                                                
|(Add) deduct (loss) earnings from discontinued operations                                 
|Net income (loss) from continuing operations                                              
|                                                                                          
|Adjustments to reconcile net income to net                                                
|cash provided by (used in) operating activities:                                          
|Depreciation                                                                              
|Stock based compensation                                                                  
|Loss (gain) from sale of property and equipment                                           
|(Increase) decrease in operating assets:                                                  
|Accounts receivable                                                                       
|Inventories                                                                               
|Other assets                                                                              
|Prepaid expenses and other current assets                                                 
|Increase (decrease) in operating liabilities:                                             
|Accounts payable                                                                          
|Other payables and accrued liabilities                                                    
|Tax payable                                                                               
|NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                                          
|                                                                                          
|CASH FLOWS FROM INVESTING ACTIVITIES                                                      
|Purchase of property and equipment                                                        
|Proceeds from disposal of property and equipment                                          
|NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                                          
|                                                                                          
|CASH FLOWS FROM FINANCING ACTIVITIES                                                      
|Proceeds on Note Payable - Third Party                                                    
|Payment of Note Payable - Third Party                                                     
|Proceed on officer loans (due to stockholders)                                            
|Payment of Note Payable -Related Party                                                    
|Issuance of Note Payable-Related Party                                                    
|Advance from (to) a third party                                                           
|Proceeds for issue of shares                                                              
|Addition in paid-in capital                                                               
|NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                                          
|                                                                                          
|Net cash transferred from (to) discontinued operation                                     
|                                                                                          
|Foreign currency translation adjustment                                                   
|                                                                                          
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                                 
|                                                                                          
|CASH AND CASH EQUIVALENTS:                                                                
|Beginning of period                                                                       
|                                                                                          
|End of period                                                                             
|                                                                                          
|Supplemental disclosures of cash flow information:                                        
|Cash
    paid for interest                                                                
|Cash
    paid for income taxes                                                            
|                                                                                          
|Supplemental disclosures of non-cash transactions:                                        
|Foreign translation adjustment - comprehensive income                                     
|Common stock issued for services                                                          
|                                                                                          
|Cash flow from discontinued operation:                                                    
|Net cash provided by ( used in) operating activities                                      
|Net cash provided by ( used in) investing activities                                      
|Net cash transferred from ( to ) continuing operations                                    
|Effect of exchange rates
    on cash and cash equivalents                                 
|Net change in cash and cash equivalents                                                   
|from discontinued operation                                                               
|Cash and cash equivalents of discontinued operation
    at:                               
|Beginning of period                                                                       
|End of period                                                                             
|                                                                                          
|                                                                                          
|The accompanying notes are an integral
    part of these consolidated financial statements



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|CHINA FRUITS CORPORATION                                                              
|--------------------------------------------------------------------------------------
|Audited Consolidated Statements of Stockholders Equity                                
|For the period ended December 31, 2009                                                
|Expressed in USD                                                                      
|                                                                                      
|                                                                                      
|Balance as of December 31, 2007                                                       
|                                                                                      
|Additional paid-in capital                                                            
|Amortization of deferred compensation                                                 
|Foreign currency adjustment                                                           
|Net loss for the year                                                                 
|Balances as of December 31, 2008                                                      
|                                                                                      
|Proceeds from sale of shares                                                          
|Foreign currency adjustment                                                           
|Net Income for the period ended December 31, 2009                                     
|Balances as of December 31, 2009                                                      
|                                                                                      
|                                                                                      
|The accompanying notes are an integral part of these consolidated financial statements





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CHINA FRUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008

(Expressed in USD)





1.  ORGANIZATION AND BUSINESS BACKGROUND



China Fruits Corporation (the “Company”
or “CHFR”) was incorporated in the State of Delaware on January 6, 1993 as Vaxcel, Inc. On December 19, 2000, CHFR
changed its name to eLocity Networks Corporation. On August 6, 2002, CHFR further changed its name to Diversified Financial Resources
Corporation. The principal activities of CHFR is seeking and consummating a merger or acquisition opportunity with a business entity.
On May 12, 2008, CHFR was re-domiciled to the State of Nevada.



On
May 31, 2008, CHFR completed a stock exchange transaction with Jiangxi Taina Guo Ye Yon Xian Gong Si (“Tai Na”). Tai
Na was incorporated as a limited liability company in the People’s Republic of China (“PRC”) on October 28, 2005
with its principal place of business in Nanfeng Town, Jiangxi Province, the PRC.Tai
Na is principally engaged in manufacturing, trading, and distributing of Nanfeng tangerine, and operating franchise retail stores
for fresh fruits through its wholly-owned subsidiary, Tai Na International Fruits (Beijing) Co. Ltd.



The stock exchange transaction involved two
simultaneous transactions:



1)the majority shareholder of CHFR delivered the 13,150 convertible Series A preferred shares
and 12,100,000 non-convertible Series B preferred shares of CHFR to Tai Na’s owners in exchange for total payments of $500,000
in cash and;



2)CHFR issued to Tai Na’s owners an amount equal to 30,000,000 new investment shares of
common stock of CHFR pursuant to Regulation S under the Securities Act of 1933, as amended, in exchange for all of the registered
capital of Tai Na.



Upon completion
of the exchange, Tai Na became a wholly-owned subsidiary of CHFR and theformer owners of Tai Na then owned 99% of the issued
and outstanding shares of the Company.



Also in connection with this stock exchange
transaction, CHFR appointed Mr. Chen, Quanlong as chief executive officer and director and Ms. Zhao, Li Li as director and Ms.
Huang, Xiaoyun as chief financial officer to CHFR. Furthermore, concurrent with the closing of this transaction, all of the Company’s
former officers resigned from their positions.



On July 12, 2006, CHFR completed a 1 for 12.5
reverse stock split on the common stock and the par value remains at $0.001 per share. The reverse stock split is not subject to
any condition other than Board of Directors approval under the Section 78 of the Nevada Revised Statutes. In addition, Certificate
of Change pursuant to NRS 78.209 was filed with the Secretary of State of Nevada in connection with the decrease in authorized
capital. As a result, the total number of issued and outstanding shares was reduced from 402,866,323 to 32,229,689 shares and par
value of its common stock was unchanged at $0.001. This is inclusive of issuance of 383 shares of common stocks as fractional shares.
All common stock and per share data for all periods presented in these financial statements have been restated to give effect to
the reverse stock split.



On August 18, 2006, CHFR changed its name to
its current name “China Fruits Corporation”.



The stock exchange transaction has been accounted
for as a reverse acquisition and recapitalization of the CHFR whereby Tai Na is deemed to be the accounting acquirer (legal acquiree)
and CHFR to be the accounting acquiree (legal acquirer). The accompanying consolidated financial statements are in substance those
of Tai Na, with the assets and liabilities, and revenues and expenses, of CHFR being included effective from the date of stock
exchange transaction. CHFR is deemed to be a continuation of the business of Tai Na. Accordingly, the accompanying consolidated
financial statements include the following:



(1)
the balance sheet consists of the net assets of the accounting acquirer at historical cost and the net assets of
the accounting acquiree at historical cost;



(2) the
financial position, results of operations, and cash flows of the acquirer for all periods presented as if the recapitalization
had occurred at the beginning of the earliest period presented and the operations of the accounting acquiree from the date of stock
exchange transaction.



CHFR and Tai Na are hereinafter referred to
as (the “Company”).





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CHINA FRUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008

(Expressed in USD)





2. GOING CONCERN UNCERTAINTIES



These consolidated financial statements have
been prepared assuming that Company will continue as a going concern, which contemplates the realization of assets and the discharge
of liabilities in the normal course of business for the foreseeable future.



As of December 31, 2009, the Company had a
negative operating cash flow of $253,994 and an accumulated deficit of $1,204,314. Management has taken certain action and continues
to implement changes designed to improve the Company’s financial results and operating cash flows.The actions involve certain cost-saving initiatives and growing strategies, including (a) reductions in headcount and corporate
overhead expenses; and (b) expansion into new market. Management believes that these actions will enable the Company to improve
future profitability and cash flow in its continuing operations through December 31, 2009. As a result, the financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the outcome of the Company’s ability to continue as a going
concern.





3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



lBasis of presentation



These accompanying consolidated financial statements
have been prepared in accordance with generally accepted accounting principles in the United States of America.



lUse of estimates



In preparing these consolidated financial statements,
management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and
revenues and expenses during the year reported. Actual results may differ from these estimates.



lBasis of consolidation



The consolidated financial statements include
the financial statements of the Company and its subsidiaries.



All significant inter-company balances and
transactions within the Company and subsidiary have been eliminated upon consolidation.



lRevenue recognition



The Company derives revenues from the resale
of non-alcoholic and alcoholic beverages and tangerine purchased from third parties, net of value added taxes (“VAT”).
The Company is subject to VAT which is levied on the majority of the products of Tai Na at the rate of 17% on the invoiced value
of sales. Output VAT is borne by customers in addition to the invoiced value of sales and input VAT is borne by the Company in
addition to the invoiced value of purchases to the extent not refunded for export sales.



In accordance with guidance issued by the FASB,
the Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has occurred or services have
been rendered, the selling price is fixed or determinable and collectability is reasonably assured. The Company’s sales arrangements
are not subject to warranty.



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CHINA FRUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008

(Expressed in USD)





Starting from October 2008, the Company commenced
the trading of tangerine in the PRC.



(a)		Sale
of products



The Company recognizes revenue from the sale
of products upon delivery to the customers and the transfer of title and risk of loss. The Company did not record any product returns
for the year ended December 31, 2009.



(b)	Interest income



Interest income is recognized on a time apportionment
basis, taking into account the principal amounts outstanding and the interest rates applicable.



lCost of revenue



Cost of revenues consists primarily of material
costs, direct labor, depreciation and overheads, which are directly attributable to the manufacture of products and the provision
of services.



lCash and cash equivalents



Cash and cash equivalents are carried at cost
and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments
with an original maturity of three months or less as of the purchase date of such investments.



lAccounts receivable



Accounts receivable are recorded at the invoiced
amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates
the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is
established and determined based on managements’ assessment of known requirements, aging of receivables, payment history,
the customer’s current credit worthiness and the economic environment. As of December 31, 2009 and 2008, the Company has
not recorded an allowance for uncollectible accounts.



lInventories



Inventories consist of finished goods and are
valued at lower of cost or market value, cost being determined on the first-in, first-out method. The Company periodically reviews
historical sales activity to determine excess, slow moving items and potentially obsolete items and also evaluates the impact of
any anticipated changes in future demand. The Company provides inventory allowances based on excess and obsolete inventories determined
principally by customer demand. As of December 31, 2009 and 2008, the Company did not record an allowance for obsolete inventories,
nor have there been any write-offs.



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CHINA FRUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008

(Expressed in USD)







lPlant and equipment, net



Plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over
the following expected useful lives from the date on which they become fully operational and after taking into account their estimated
residual values:



|                                 | Depreciable life |  | Residual value
|-------------------------------- | ---------------- |  | --------------
|Plant and machinery              | 10-12 years      |  | 5%            
|Furniture, fixture and equipment | 5-6 years        |  | 5%            



Expenditure for maintenance and repairs is
expensed as incurred.



lImpairment of long lived assets



In accordance with guidance issued by the FASB,
long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is evaluated by a comparison of the carrying amount of assets to estimated discounted net cash flows expected
to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amounts of the assets exceed the fair value of the assets.



lComprehensive income (loss)



FASB ASC 220, “Reporting Comprehensive
Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances.
Comprehensive income as defined includes all changes in equity during the year from non-owner sources. Accumulated comprehensive
income, as presented in the accompanying consolidated statement of stockholders’ equity consists of changes in unrealized
gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense
or benefit.



lIncome taxes



The Company accounts for income tax using FASB
ASC 740 “Accounting for Income Taxes”, which requires the asset and liability approach for financial accounting
and reporting for income taxes. Under this approach, deferred income taxes are provided for the estimated future tax effects attributable
to temporary differences between financial statement carrying amounts of assets and liabilities and their respective tax bases,
and for the expected future tax benefits from loss carry-forwards and provisions, if any. Deferred tax assets and liabilities are
measured using the enacted tax rates expected in the years of recovery or reversal and the effect from a change in tax rates is
recognized in the consolidated statement of operations and comprehensive income in the period of enactment. A valuation allowance
is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of
the deferred tax assets will not be realized.



lNet loss per share



The Company calculates net loss per share in
accordance with FASB ASC 260, “Earnings per Share”. Basic loss per share is computed by dividing the net loss
by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share
except that the denominator is increased to include the number of additional common shares that would have been outstanding if
the potential common stock equivalents had been issued and if the additional common shares were dilutive.



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CHINA FRUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008

(Expressed in USD)







lForeign currencies translation



The reporting currency of the Company is the
United States dollar (“U.S. dollars”). Transactions denominated in currencies other than U.S. dollar are calculated
at the average rate for the period. Monetary assets and liabilities denominated in currencies other than U.S. dollar are translated
into U.S. dollar at the rates of exchange ruling at the balance sheet date. The resulting exchange differences are recorded in
the other expenses in the consolidated statement of operations and comprehensive income.



The Company’s subsidiary maintains its
books and records in its local currency, the Renminbi Yuan (“RMB”), which is functional currency as being the primary
currency of the economic environment in which its operations are conducted. In general, for consolidation purposes, the Company
translates the subsidiary’s assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the
balance sheet date, and the statement of operations is translated at average exchange rates during the reporting period. Adjustments
resulting from the translation of the subsidiary’s financial statements are recorded as accumulated other comprehensive income.



lRetirement plan costs



Contributions to retirement schemes (which
are defined contribution plans) are charged to general and administrative expenses in the consolidated statements of income and
comprehensive income as and when the related employee service is provided.



lRelated parties



Parties, which can be a corporation or individual,
are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Companies are also considered to be related if they
are subject to common control or common significant influence. A material related party transaction has been identified in Note
14 in the financial statements.



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CHINA FRUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008

(Expressed in USD)







lFair value of financial instruments



The Company values its financial instruments
as required by FASB ASC 825, “Disclosures about Fair Value of Financial Instruments”. The estimated fair value
amounts have been determined by the Company, using available market information and appropriate valuation methodologies. The estimates
presented herein are not necessarily indicative of amounts that the Company could realize in a current market exchange.



The Company’s financial instruments primarily
include cash and cash equivalents, accounts receivable, advance to a third party, inventories, VAT and income tax recoverable,
accounts payable, other payables and accrued liabilities.



As of the balance sheet date, the estimated
fair values of financial instruments were not materially different from their carrying values as presented due to short maturities
of these instruments.



lEquity-based compensation



The Company adopts FASB ASC 718“Accounting
for Stock-Based Compensation” using the fair value method. Under SFAS No. 123R,
stock-based compensation expense is measured at the grant date based on the value of the option or restricted stock and is recognized
as expense, less expected forfeitures, over the requisite service period, which is generally the vesting period. See Note 13
for additional information.



lSubsequent Events



We evaluated subsequent events through the date and time our financial
statements were issued on April 12, 2010.



lRecently issued accounting standards



In
January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820) - Improving Disclosures
about Fair Value Measurements.” ASU 2010-06 requires new disclosures regarding transfers in and out of the Level 1 and
2 and activity within Level 3 fair value measurements and clarifies existing disclosures of inputs and valuation techniques for
Level 2 and 3 fair value measurements. ASU 2010-06 also includes conforming amendments to employers’ disclosures about postretirement
benefit plan assets. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting
periods beginning after December 15, 2009, except for the disclosure of activity within Level 3 fair value measurements, which
is effective for fiscal years beginning after December 15, 2010, and for interim periods within those years.The adoption
of this statement is not expected to have a material impact on our consolidated financial position or results of operation.



In June 2009, the FASB issued SFAS No. 168,
“The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles - a replacement
of FASB Statement No. 162” (also issued as Accounting Standards Update “ASU”No. 2009-01).
This standard establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized
by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted
accounting principles. This standard is effective for financial statements issued for interim and annual periods ending after September 15,
2009. The adoption of ASU No. 2009-5 had no impact on the results of operations or the financial position of the Company.



In August 2009, the FASB issued ASU No. 2009-5,
“Fair Value Measurements and Disclosures (Topic 820) - Measuring Liabilities at Fair Value.” ASU No. 2009-5
provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available,
a reporting entity is required to measure fair value using a valuation technique that uses the quoted price of the identical liability
when traded as an asset, quoted prices for similar liabilities or similar liabilities when traded as assets, or another valuation
technique that is consistent with the principles of ASC Topic 820. ASU No. 2009-5 is effective for the first reporting period
(including interim periods) beginning after issuance. The adoption of ASU No. 2009-5 did not have a material impact on the
results of operations or financial position of the Company.



In May 2009, the FASB issued a new accounting
standard (FASB ASC 855-10) on subsequent events, which establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are issued or are available to be issued. This accounting
standard establishes: 1) the period after the balance sheet date during which management of a reporting entity should evaluate
events or transactions that may occur for potential recognition or disclosure in the financial statements; 2) the circumstances
under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements;
and 3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This
accounting standard also requires disclosure of the date through which an entity has evaluated subsequent events. The adoption
of this statement is not expected to have a material impact on our consolidated financial position or results of operation.



In April 2009, the FASB issued FASB Staff Position
No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” (FASB ASC 320-10-65),
which amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational
and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial
statements. This Staff Position was effective for interim and annual reporting periods ending after June 15, 2009. The adoption
of this statement did not have an impact on the results of operations or the financial position of the Company.



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CHINA FRUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008

(Expressed in USD)





4.	ACCOUNTS RECEIVABLE, NET



The majority of the Company’s sales are
on open credit terms and in accordance with terms specified in the contracts governing the relevant transactions. The Company evaluates
the need of an allowance for doubtful accounts based on specifically identified amounts that management believes to be uncollectible.
If actual collections experience changes, revisions to the allowance may be required. Based upon the aforementioned criteria, management
has determined that an allowance for doubtful accounts of $1,272 is required as of December 31, 2008. No allowance was considered
necessary as of December 31, 2009.



|                                      |  |  
|------------------------------------- |  | -
|                                      |  |  
|                                      |  |  
|Accounts receivable, gross            |  | $
|                                      |  |  
|Less: allowance for doubtful accounts |  |  
|Accounts receivable, net              |  | $





5.	RECEIVABLE FROM THIRD PARTIES



The company advances money to several third
parties during business operation. These receivables bear no interest and due on demand. As of December 31, 2009 and 2008, the
balances of receivable from third parties are:



|                              |  |  
|----------------------------- |  | -
|                              |  |  
|                              |  |  
|Third party advances          |  | $
|                              |  |  
|Bank security deposit         |  |  
|Receivable from third parties |  | $



6.	INVENTORIES



Inventories as of December 31, 2009 and 2008
consist of the following:

|               |  |  
|-------------- |  | -
|               |  |  
|               |  |  
|               |  |  
|Raw materials  |  | $
|Finished goods |  |  
|               |  | $



For the year ended December 31, 2009 and 2008,
no provision for obsolete inventories was recorded by the Company.



7.	PLANT AND EQUIPMENT, NET



Plant and equipment, net as of December 31,
2009 and 2008 consists of the following:



|                                 |  | 2009 |           | 2008
|-------------------------------- |  | ---- | --------- | ----
|Plant and machinery              |  | $    | 2,217,568 |     
|Construction in progress         |  |      | 3,821     |     
|Furniture, fixture and equipment |  |      | 40,256    |     
|                                 |  |      | 2,261,645 |     
|Less: accumulated depreciation   |  |      | (300,180  | )   
|Plant and equipment, net         |  | $    | 1,961,465 |     



Depreciation expense for the year ended December
31, 2009 and 2008 respectively was $48,698 and $179,340.



Construction in progress is stated at cost,
which includes the cost of construction and other direct costs attributable to the construction. No provision for depreciation
is made on construction in progress until such time as the relevant assets are completed and put into use. Construction in progress
as of December 31, 2009, represents buildings under construction.



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CHINA FRUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008

(Expressed in USD)





8.	OTHER PAYABLES AND ACCRUED LIABILITIES



Other payables and accrued liabilities as of
December 31, 2009 and 2008 consist of following:



|                           |  | 2009 |         | 2008
|-------------------------- |  | ---- | ------- | ----
|                           |  |      |         |     
|                           |  |      |         |     
|Salary and welfare payable |  |      | 64,100  |     
|                           |  |      |         |     
|Accrued expenses           |  |      | 167,173 |     
|                           |  | $    | 231,273 |     





9.	AMOUNT DUE TO STOCKHOLDERS



The balances due to stockholders represented
unsecured advances which are interest-free and repayable in next twelve months. As of December 31, 2009 and 2008, the balances
of due to stockholders are $335,146 and $222,082.





10.	NOTE PAYABLE TO THIRD PARTIES



On July 20, 2009, the Company borrowed from
a local bank in total amount of $439,354 (3,000,000RMB), the note bears annual interest 5.841% and is due on July 20, 2010.



In 2009, the company borrowed four loans in total amount of $461,322
(3,150,000RMB) from local government. These loans bear no interest and will be paid back before November 30, 2012 and November
30, 2013, respectively.





11.	NOTE PAYABLE- RELATED PARTY



On May 15, 2009, the Company borrowed two loans
from one related party in total amount of $95,194 (650,000RMB), these notes bear no interest and are payable on May 14, 2010.





12.	INCOME TAXES



The Company conducts all its operating business
through its subsidiary in China. The subsidiary is governed by the income tax laws of the PRC and do not have any deferred tax
assets or deferred tax liabilities under the income tax laws of the PRC because there are no temporary differences between financial
statement carrying amounts and the tax bases of existing assets and liabilities. The Company by itself does not have any business
operating activities in the United States and is therefore not subject to United States income tax.



The Company’s subsidiaries are governed
by the Income Tax Law of the People’s Republic of China (PRC) concerning Foreign Investment Enterprises and Foreign Enterprises
and various local income tax laws (the Income Tax Laws). Beginning January 1, 2008, the new Enterprise Income Tax (“EIT”)
law has replaced the previous laws for Domestic Enterprises (“DEs”) and Foreign Invested Enterprises (“FIEs”).
The new standard EIT rate of 25% has replaced the 33%

rate previously applicable to both DEs and
FIEs.



Prior to 2008, under the Chinese Income Tax
Laws, FIEs generally were subject to an income tax at an effective rate of 33% (30% state income taxes plus 3% local income taxes)
on income as reported in their statutory financial statements after appropriate tax adjustments unless the enterprise was located
in specially designated regions for which more favorable effective tax rates apply. Beginning January 1, 2008, China has unified
the corporate income tax rate on foreign invested enterprises and domestic enterprises. The unified corporate income tax rate is
25%.



The Company generated substantially its net
income from its PRC operation and has recorded income tax provision for the years ended December 31, 2009 and 2008.



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CHINA FRUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008

(Expressed in USD)







The components of (loss) income before income
taxes separating U.S. and PRC operations are as follows:



|                                       |  | 2009 |          | 2008
|-------------------------------------- |  | ---- | -------- | ----
|                                       |  |      |          |     
|                                       |  |      |          |     
|Loss subject to U.S. operation         |  | $    | (123,173 | )   
|Income (loss) subject to PRC operation |  |      | (123,188 | )   
|                                       |  |      |          |     
|Income (loss) before income taxes      |  | $    | (246,361 | )   



United States of America



The Company is registered in the State of Nevada
and is subject to United States of America tax law.



As of December 31, 2009, the U.S. operation
had $1,687,557 of net operating losses available for federal tax purposes, which are available to offset future taxable income.
The net operating loss carry forwards begin to expire in 2029. The Company has provided for a full valuation allowance for any
future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these
assets will not be realized in the future.



The PRC



The reconciliation of income tax rate to the
effective income tax rate based on income before income taxes stated in the consolidated statement of operations for the year ended
December 31, 2009 and 2008 is as follows:



|                                          |  | 2009 |          | 2008
|----------------------------------------- |  | ---- | -------- | ----
|                                          |  |      |          |     
|                                          |  |      |          |     
|Income (loss) before income taxes         |  | $    | (110,973 | )   
|Statutory income tax rate                 |  |      | 25       | %   
|                                          |  |      | —        |     
|Expenses not deductible for tax purposes: |  |      | 12,215   |     
|- Provisions                              |  |      |          |     
|Effect of tax losses                      |  |      | —        |     
|                                          |  |      |          |     
|Income tax expense                        |  | $    | 12,215   |     





The following table sets forth the significant
components of the aggregate net deferred tax assets of the Company as of December 31, 2009 and 2008:



|                                   |  | 2009 |          | 2008
|---------------------------------- |  | ---- | -------- | ----
|                                   |  |      |          |     
|Deferred tax assets:               |  |      |          |     
|- Net operating loss carryforwards |  | $    | 573,769  |     
|Less: valuation allowance          |  |      | (573,769 | )   
|                                   |  |      |          |     
|Deferred tax assets                |  | $    | —        |     



For the year ended December 31, 2009 and 2008,
valuation allowances of $573,769 and $531,890 were provided to the deferred tax assets due to the uncertainty surrounding their
realization.



The following table reconciles the U.S. statutory rate to the Company’s
effective tax rate:



|                                     |  |   | 2009 |   |  |   | 2008 |  
|------------------------------------ |  | - | ---- | - |  | - | ---- | -
|                                     |  |   |      |   |  |   |      |  
|U.S. Statutory rate                  |  |   | 34   | % |  |   | 34   | %
|Foreign income not recognized in USA |  |   | (34  | ) |  |   | (34  | )
|China income taxes                   |  |   | 25   |   |  |   | 25   |  
|China exemption                      |  |   | (25  | ) |  |   | (25  | )
|Total provision for income taxes     |  | $ | —    |   |  | $ | —    |  



The Company applies FASB ASC 740-10, “Accounting
for Income Taxes”, which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences
of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income
taxes consist of taxes currently due plus deferred taxes. Because the Company has no operations within the United States, there
is no provision for US income taxes and there are no deferred tax amounts as of December 31, 2009 and 2008.



The charge for taxation is based on the results
for the year as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date. Deferred taxes are accounted for using the balance sheet liability method in
respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities
are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable
that taxable profit will be available against which deductible temporary differences can be utilized.



Deferred taxes are calculated at the tax rates
that are expected to apply to the period when the asset is realized or the liability is settled. Deferred taxes are charged or
credited in the income statement, except when they relate to items credited or charged directly to equity, in which case the deferred
taxes are also recorded in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the
same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. The Company adopted
FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), as of January 1, 2007.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained
in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit
that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not”
test, no tax benefit is recorded. The adoption of FIN 48 had no affect on the Company’s financial



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CHINA FRUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008

(Expressed in USD)





13.	NET LOSS PER SHARE



Basic net loss per share is computed using
the weighted average number of the ordinary shares outstanding during the year. Diluted net loss per share is computed using the
weighted average number of ordinary shares and ordinary share equivalents outstanding during the year.



The following table sets forth the computation
of basic and diluted net loss per share for the year indicated:



|                                                    |  | 2009 |            | 2008
|--------------------------------------------------- |  | ---- | ---------- | ----
|Basis and diluted net loss per share calculation    |  |      |            |     
|Numerator:                                          |  |      |            |     
|- Net income in computing basic net loss per share  |  | $    | (246,361   | )   
|                                                    |  |      |            |     
|Denominator:                                        |  |      |            |     
|- Weighted average ordinary shares outstanding      |  |      | 36,225,579 |     
|- Stock issued for services                         |  |      |            |     
|- Shares used in computing basic net loss per share |  |      | 36,225,579 |     
|                                                    |  |      |            |     
|Basic and diluted net loss per share                |  | $    | (0.01      | )   
|                                                    |  |      |            |     



There were no dilutive common stock equivalents
as of December 31, 2009 and 2008.





14.	CAPITAL TRANSACTIONS



1)On January 11, 2008, the Company received a contribution to paid in capital of $256,707



2)On March 18, 2008, the Company received a contribution to paid in capital of $14,988



3)On December 11, 2009, pursuant to an Offshore Stock Purchase Agreement dated May 15, 2009,
the Company issued 1,750,000 restricted shares of common stock at a purchase price of $0.20 per share (aggregate sum of $350,000).



15.	STOCK BASED COMPENSATION



On October 27, 2006, the Company entered into
a business consulting service agreement with the Consultant A in exchange for 1,500,000 shares of common stock. The fair value
of the common stock issued is determined using the fair value of the Company’s common stock on the grant date at $0.31 per
share. The Company calculated a stock based compensation of $465,000 and recognized $335,834 for the year ended December 31, 2006.
The balance of 129,166 was expensed during the year ended December 31, 2007.



On October 31, 2006, the Company entered into
a website construction service agreement with the Consultant B in exchange for 1,500,000 shares of common stock. The fair value
of the common stock issued is determined using the fair value of the Company’s common stock on the grant date at $0.31 per
share. The Company calculated a stock based compensation of $465,000 and recognized $38,750 for the year ended December 31, 2006
and $232,500 for the year ended December 31, 2007. The balance of $193,750 was expensed during the year ended December 31, 2008.



16.	RELATED PARTY TRANSACTIONS



On May 15, 2009, the Company borrowed two loans
from one related party in total amount of $95,194 (650,000RMB), these notes bear no interest and are payable on May 14, 2010.



No related party transactions occurred during
2008.



17.	CHINA CONTRIBUTION PLAN



Under the PRC Law, full-time employees of the
Company’s subsidiary, Tai Na are entitled to staff welfare benefits including medical care, welfare subsidies, unemployment
insurance and pension benefits through a China government-mandated multi-employer defined contribution plan. Tai Na is required
to accrue for these benefits based on certain percentages of the employees’ salaries. The total contributions made for such
employee benefits were $34,457 and $4,194 for the years ended December 31, 2009 and 2008, respectively.





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CHINA FRUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008

(Expressed in USD)





18.	STATUTORY RESERVES



Under PRC Company Law, the Company’s
subsidiary, Tai Na is required to make appropriations to the statutory reserve based on after-tax net income and determined in
accordance with generally accepted accounting principles of the People’s Republic of China (the “PRC GAAP”).
Appropriation to the statutory reserve should be at least 10% of the after-tax net income until the reserve is equal to 50% of
Tai Na’s registered capital. The statutory reserve is established for the purpose of providing employee facilities and other
collective benefits to the employees and is non-distributable other than in liquidation.



For the year ended December 31, 2009 and 2008,
Tai Na contributed $0 and $0 respectively to statutory reserve.





19.	CONCENTRATION AND RISK



(a)	Major customers



For the years ended December 31, 2009 and 2008,
100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues and purchases were derived
from customers and vendors located in the PRC.



For the year ended December 31, 2009, major
customers and vendors with their revenues and purchases are presented as follows:



|Customers  |  |  |       | Revenues |  |   |           |  |  | Accounts Receivable
|---------- |  |  | ----- | -------- |  | - | --------- |  |  | -------------------
|Customer A |  |  |       |          |  | $ | 174,203   |  |  |                    
|Customer B |  |  |       |          |  |   | 156,716   |  |  |                    
|Customer C |  |  |       |          |  |   | 147,194   |  |  |                    
|Customer D |  |  |       |          |  |   | 142,583   |  |  |                    
|Customer E |  |  |       |          |  |   | 84,020    |  |  |                    
|           |  |  |       |          |  |   |           |  |  |                    
|           |  |  | Total |          |  | $ | 1,077,805 |  |  |                    





For the year ended December 31, 2008, major
customers and vendors with their revenues and purchases are presented as follows:

|Customers  |  |  |        | Revenues |  |   |         |  |  | Accounts Receivable
|---------- |  |  | ------ | -------- |  | - | ------- |  |  | -------------------
|Customer A |  |  |        |          |  | $ | 606,218 |  |  |                    
|Customer B |  |  |        |          |  |   | 143,926 |  |  |                    
|Customer C |  |  |        |          |  |   | 28,969  |  |  |                    
|           |  |  |        |          |  |   |         |  |  |                    
|           |  |  | Total: |          |  | $ | 779,113 |  |  |                    
|           |  |  |        |          |  |   |         |  |  |                    



(b)	Credit risk



Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company
performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.





20.	COMMITMENT AND CONTINGENCIES



The Company rented plant, office, and retailing
spaces under a non-cancelable operating lease agreement. Based on the current rental lease agreement, the future minimum rental
payments required as of December 31, 2009 are as follows:



|Year ending December 31: |  |  
|------------------------ |  | -
|                         |  |  
|2009                     |  | $



For the years ended December 31, 2009 and 2008,
rental expense was $14,264 and $46,600.



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CHINA FRUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008

(Expressed in USD)





21. DISCONTINUED OPERATION



In June 8, 2009, the company entered an
agreement with a third party to sell the company’s wine production line. Pursuant to the agreement, the wine production
line was sold in amount of $450,826 (3,080,000 RMB), with $99,537 (680,000RMB) in cash as the first installment paid before June
13, 2009 and the rest be paid before August 31, 2009. The company’s historical consolidated financial statements have been
recast to account for this discontinued operations for all periods presented. The following table summarizes the results of operations
related to the discontinued operations for the nine year ended December 31, 2009:



|                                                                |  | 2009
    (As restated, see note 23) |          | 2008
|--------------------------------------------------------------- |  | ----------------------------------- | -------- | ----
|Revenue                                                         |  | $                                   | 274,228  |     
|Cost and expenses                                               |  |                                     | (355,061 | )   
|Gain from disposal of property and equipment                    |  |                                     | 4,910    |     
|                                                                |  |                                     |          |     
|Income (loss) from discontinued operations, net of income taxes |  | $                                   | (75,923  | )   



22. SUBSEQUENT EVENT



On January 12, 2010, the Company entered into
an Offshore Subscription Agreement between the Company and an individual, pursuant to which the individual will purchase 900,000
shares of restricted common stock of the Company at a purchase price of $0.20 per share (aggregate sum of $180,000).



23. RESTATEMENT



We have restated our previously
issued consolidated statement of operations and cash flows for the years ended December 31, 2009 and 2008 to present income and
cash flows from discontinued operations in accordance of GAAP. Specifically, we previously misclassified some expenses from discontinued
operation in the operating expenses from continued operation. We also presented cash flows from discontinued operations within
the cash flows from continued operations that should have been presented separately.

The following tables illustrate the effects of the restatement
on the consolidated statement of operations and cash flows for the years ended December 31, 2009 and 2008:



|                                                          |  | For the year ended       |           | For the year ended |  | For the year ended       |          | For the year ended
|--------------------------------------------------------- |  | ------------------------ | --------- | ------------------ |  | ------------------------ | -------- | ------------------
|                                                          |  | 12/31/2009               |           | 12/31/2009         |  | 12/31/2008               |          | 12/31/2008        
|                                                          |  | (As previously reported) |           | (As restated)      |  | (As previously reported) |          | (As restated)     
|Consolidated Statement of Operations:                     |  |                          |           |                    |  |                          |          |                   
|OPERATING EXPENSES:                                       |  |                          |           |                    |  |                          |          |                   
|General and administrative                                |  |                          | 683,603   |                    |  |                          | 508,650  |                   
|TOTAL OPERATING EXPENSES                                  |  |                          | 1,055,341 |                    |  |                          | 880,388  |                   
|                                                          |  |                          |           |                    |  |                          |          |                   
|OTHER INCOME (EXPENSE):                                   |  |                          |           |                    |  |                          |          |                   
|Gain (loss) on disposal of equipment                      |  |                          |           |                    |  |                          | (1,311   | )                 
|TOTAL OTHER INCOME (EXPENSES)                             |  |                          | 147,831   |                    |  |                          | 146,520  |                   
|                                                          |  |                          |           |                    |  |                          |          |                   
|NET INCOME(LOSS) FROM CONTINUING OPERATIONS               |  |                          | (344,080  | )                  |  |                          | (170,438 | )                 
|NET INCOME(LOSS) FROM DISCONTINUED OPERATIONS             |  |                          | 97,719    |                    |  |                          | (75,923  | )                 
|                                                          |  |                          |           |                    |  |                          |          |                   
|Consolidated Statement of Cash Flows:                     |  |                          |           |                    |  |                          |          |                   
|CASH FLOWS FROM OPERATING ACTIVITIES:                     |  |                          |           |                    |  |                          |          |                   
|(Add) deduct (loss) earnings from discontinued operations |  |                          | 97,719    |                    |  |                          | (75,923  | )                 
|Loss (gain) from sale of property and equipment           |  |                          |           |                    |  |                          | 1311     |                   
|Operating cash flow from discontinued operations          |  |                          | 97,719    |                    |  |                          |          |                   
|NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES          |  |                          | (253,994  | )                  |  |                          | (176,760 | )                 
|                                                          |  |                          |           |                    |  |                          |          |                   
|CASH FLOWS FROM INVESTING ACTIVITIES                      |  |                          |           |                    |  |                          |          |                   
|Proceeds from disposal of property and equipment          |  |                          | 545,321   |                    |  |                          | 12,853   |                   
|NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES          |  |                          | 106,030   |                    |  |                          | (426,438 | )                 
|                                                          |  |                          |           |                    |  |                          |          |                   
|Net cash transferred from (to) discontinued operation     |  |                          |           |                    |  |                          | 349,946  |                   
|                                                          |  |                          |           |                    |  |                          |          |                   
|Foreign currency translation adjustment                   |  |                          | 7,745     |                    |  |                          | 113,033  |                   







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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE



There have been no changes in and disagreements
with accountants on accounting and financial disclosure in the past two fiscal years.



ITEM 9A. CONTROLS AND PROCEDURES



We maintain disclosure controls and procedures
designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Exchange
Act”) is recorded, processed, summarized and reported within the specified time periods. Our Chief Executive Officer and
our Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for maintaining our disclosure
controls and procedures. The controls and procedures established by us are designed to provide reasonable assurance that information
required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Commission’s rules and forms.



To evaluate the effectiveness of our internal
controls over financial reporting, we have adopted the framework prescribed by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).  We believe that this framework will assist in the provision of reasonable assurance of the
effectiveness and efficiency of operations, the reliability of financial reporting, and compliance with applicable laws and regulations.  In
adopting the COSO framework, we maintain a control environment, perform risk assessments, carry out control activities, emphasize
quality information and effective communication, and perform monitoring.  In the maintenance of a control environment,
we are committed to integrity and ethical values as well as to competence.  We strive to assign authority and responsibility
in a manner that supports our internal controls, and we also maintain human resources policies and procedures designed to support
our internal controls.  Our risk assessments are designed to ensure the achievement of company-wide and process-level
objectives as well as to identify and analyze risks while managing change.  We believe that all of these components together
form a foundation for sound internal control through directed leadership, shared values and a culture that emphasizes accountability
for control.



As of the end of the period covered by this
report, the Certifying Officers evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation,
the Certifying Officers concluded that our disclosure controls and procedures were effective to provide reasonable assurance that
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated
to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.



The Certifying Officers have also concluded,
based on our evaluation of our controls and procedures that as of December 31, 2009, our internal controls over financial reporting
are effective and provide a reasonable assurance of achieving their objective.



Due to its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements under all potential conditions. Therefore, effective internal
control over financial reporting provides only reasonable, and not absolute, assurance that a restatement of our financial statements
would be prevented or detected.



This annual report does not include an attestation
report of our registered public accounting firm regarding internal control over financial reporting. Management's report was
not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in this annual report.



Changes in Internal Control Over Financial Reporting



There were no changes in the our internal control
over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.



This annual report does not include an attestation
report of our registered public accounting firm regarding internal control over financial reporting. Management's report was
not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in this annual report.



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ITEM 9A(T).CONTROLS AND PROCEDURES



(a) Conclusions regarding disclosure
controls and procedures. Disclosure controls and procedures are the Company’s controls and other procedures that
are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits
under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the Company in the reports that it files under the Exchange Act
is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure. Management is responsible for establishing and maintaining
adequate internal control over financial reporting.



Under the supervision and with the participation
of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our
disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Exchange Act as of December
31, 2009, and, based on their evaluation, as of the end of such period, the our disclosure controls and procedures were effective
as of the end of the period covered by the Annual Report,



(b) Management’s Report On
Internal Control Over Financial Reporting. It is management’s responsibilities to establish and maintain adequate
internal controls over the Company’s financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f)
or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal
executive and principal financial officers and effected by the issuer’s management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and includes those policies and procedures that:



• 	Pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; and



• 	Provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management
of the issuer; and



• 	Provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material
effect on the financial statements.



As of the end of the period covered by the
Annual Report, an evaluation was carried out under the supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of our internal control over financial reporting.



Management assessed the effectiveness of our
internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.



Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that, as of the end of such period, internal controls over financial reporting
were effective as of the end of the period covered by the Report.



Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements
may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations
are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce,
though not eliminate, this risk.



This Annual Report does not include an attestation
report of our registered public accounting firm regarding internal control over financial reporting. Management’s report
was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this Annual Report.



(c) Changes in internal control
over financial reporting. There were no changes in our internal control over financial reporting identified in connection
with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



ITEM 9B. OTHER INFORMATION



None.





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PART III



ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT



Directors and Executive Officers



Our directors are elected at the annual meeting of shareholders
and hold office for one year and until their successors are elected and qualified. Our officers are appointed by the Board of Directors
and serve at the pleasure of the Board. We have not entered into any employment agreements with our executive officers.



|Name            | Age | Position                                        | Date to Start  
|--------------- | --- | ----------------------------------------------- | ---------------
|Chen, Quan Long | 50  | President, Chief Executive Officer and Chairman | June 1, 2006   
|Wang, Yongcheng | 31  | Chief Financial Officer                         | August 24, 2009
|Zhao, Li Li     | 3 8 | Director                                        | June 22, 2006  



Chen, Quan Long - President, Chief Executive Officer and
Chairman



Mr. Chen, Quan Long, 50, obtained a Master
of Business Administration degree at Beijing University. His prior work experience is primarily in corporate. He was chairman of
Fei Huan Group, a corporation organized and existing under the laws of the Peoples' Republic of China ("Fei Huan Group"),
from October 1988 to December 2001. Since January 2002, he was Chairman of Fei Huan Wine, Inc., an affiliate of Fei Huan Group.
Mr. Chen’s duties with Fei Huan Group included management of their beverage processing and distribution. Mr. Chen is a member
of the Chinese Entrepreneurial Association.



Wang, Yongcheng - Chief Financial Officer



Mr. Wang is a certified public accountant in
China and Australia. Mr. Wang is experienced in financial management with outstanding comprehensive skills and management skills.
From April 2005 to March 2009, Mr. Wang worked in BOE Technology Group, Ericsson (China) Communications Co., Ltd., and Schenker
China Ltd. at the positions as accountant, general ledger accountant and financial supervisor, etc. Mr. Wang was a team member
in auditing LG CNS China, China Aviation Fuel Corporation and TCL Corporation when he worked in Beijing Yuehua Accounting Firm
and Beijing Mingguang Accounting Firm from January 2004 to July 2004.



Mr. Wang received his master degree from the
Capital University of Economics and Business in 2005.



Zhao, Li Li - Director



Ms. Zhao, Li Li has approximately 10 years of experience in sales
management. Her experience includes sales management, corporate restructuring, and human resources management.



Ms. Zhao was
a deputy general manager for Fei Huan Winery Holding Co. in P. R. China where she had worked for the period from 2003 to 2006.
Prior work experience includes four years at Fei Huan Group where she functioned as a sales manager. Currently, Ms. Zhao is
the General Manager of Taina Nanfeng Orange (Beijing) Co., Ltd.



Ms. Zhao gained her Bachelor degree in Jiang Xi Economic Management
College for business management in 1994. Ms. Zhao was awarded the Fuzhou Excellent Entrepreneur of the Year 2007, also during 2008
and 2009, she has awarded Jiangxi Provincial Women's Federation for Outstanding Women Entrepreneurs and the first model workers
in Nanfeng County.



Family Relationships.



None.



Legal Proceedings.



No officer, director, or persons nominated for such positions and
no promoter or significant employee has been involved in legal proceedings that would be material to an evaluation of our management.



Audit Committee



We do not have a separately designated standing
audit committee. Pursuant to Section 3(a)(58)(B) of the Exchange Act, the entire Board of Directors acts as an audit committee
for the purpose of overseeing the accounting and financial reporting processes, and audits of our financial statements. The Commission
recently adopted new regulations relating to audit committee composition and functions, including disclosure requirements relating
to the presence of an "audit committee financial expert" serving on its audit committee. In connection with these new
requirements, our Board of Directors examined the Commission's definition of "audit committee financial expert" and concluded
that we do not currently have a person that qualifies as such an expert. We have had minimal operations for the past two (2) years.
Presently, there are only four (4) directors serving on our Board, and us are not in a position at this time to attract, retain
and compensate additional directors in order to acquire a director who qualifies as an "audit committee financial expert",
but we intend to retain an additional director who will qualify as such an expert, as soon as reasonably practicable. While neither
of our current directors meets the qualifications of an "audit committee financial expert", each of our directors, by
virtue of his past employment experience, has considerable knowledge of financial statements, finance, and accounting, and has
significant employment experience involving financial oversight responsibilities. Accordingly, we believe that our current directors
capably fulfill the duties and responsibilities of an audit committee in the absence of such an expert.



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Code of Ethics



We have adopted a code of ethic (the "Code
of Ethics") that applies to our principal chief executive officer, principal financial officer, principal accounting officer
or controller, or persons performing similar functions. The Code of Ethics is being designed with the intent to deter wrongdoing,
and to promote the following:



|• |  | Honest and ethical
conduct, including the ethical handling of actual or apparent conflicts of interest between personal
and professional relationships
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

|• |  | Full, fair, accurate,
timely and understandable disclosure in reports and documents that a small business issuer files with,
or submits to, the Commission and in other public communications made by the small business issuer
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|• |  | Compliance with
applicable governmental laws, rules and regulations
|- |  | -------------------------------------------------------------------

| |  | The prompt internal reporting
of violations of the code to an appropriate person or persons identified in the code
| |  | ------------------------------------------------------------------------------------------------------------------

|• |  | Accountability
for adherence to the code
|- |  | ----------------------------------------



Section 16(a) Beneficial Ownership Reporting Compliance



Under Section 16(a) of the Exchange Act, all
executive officers, directors, and each person who is the beneficial owner of more than 10% of the common stock of a company that
files reports pursuant to Section 12 of the Exchange Act, are required to report the ownership of such common stock, options, and
stock appreciation rights (other than certain cash-only rights) and any changes in that ownership with the Commission. Specific
due dates for these reports have been established, and we are required to report, in this Form 10-K/A, any failure to comply therewith
during the fiscal year ended December 2008. We believe that all of these filing requirements were satisfied by our executive officers,
directors and by the beneficial owners of more than 10% of our common stock. In making this statement, hawse have relied solely
on copies of any reporting forms received by it, and upon any written representations received from reporting persons that no Form
5 (Annual Statement of Changes in Beneficial Ownership) was required to be filed under applicable rules of the Commission.



ITEM 11. EXECUTIVE COMPENSATION



The following table sets forth certain information
regarding the annual and long-term compensation for services in all capacities to us for the prior fiscal years ended December
31, 2009, 2008, and 2007, of those persons who were either the chief executive officer during the last completed fiscal year or
any other compensated executive officers as of the end of the last completed fiscal year, and whose compensation exceeded $100,000
for those fiscal periods.



|SUMMARY COMPENSATION TABLE                       
|-------------------------------------------------
|Name and principal position
        (a)          
|Chen, Quan Long
        President, CEO & Chairman
|2008                                             
|2007                                             
|                                                 
|Zhao, Li Li
        Director                     
|2008                                             
|2007                                             
|Wang, Yongcheng Chief Financial Officer          



We have not entered into any other employment
agreements with our employees, Officers or Directors. We have no standard arrangements to compensate our directors for their services
to us.



Stock Option Plan



We have not implemented a stock option plan
at this time and since inception, have issued no stock options, SARs or other compensation. We may decide, at a later date, and
reserve the right to, initiate such a plan as deemed necessary by the Board.



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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCK HOLDER MATTERS.



As of April 8, 2010, we had 3,640 stockholders
of record and 38,779,689 shares of our Common Stock, 13,150 shares of our Series A Preferred Stock and 12,100,000 Series B Preferred
Stock issued and outstanding. The following table sets forth as of April 8, 2010, certain information with respect to the beneficial
ownership of Common Stock by (i) each of our Director, nominee and executive officer; (i) each person who owns beneficially more
than 5% of the common stock; and (iii) all Directors, nominees and executive officers as a group. The percentage of shares beneficially
owned is based on there having been 38,779,689 shares of our Common Stock, 13,150 shares of our Series A Preferred Stock and 12,100,000
Series B Preferred Stock issued and outstanding as of April 8, 2010



OFFICERS, DIRECTORS AND BENEFICIAL OWNERS, AS
OF APRIL 8, 2010



|Title of Class                            | Name & Address of Beneficial Owner(1)                                                                                       | Amount & Nature of Beneficial Owner | % of Class(2)
|----------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | -------------
|                                          |                                                                                                                             |                                     |              
|Series A Preferred Stock, $.001 par value | Chen, Quan Long
        Room 503,Building 53,QianXi District, DaDao Road, NanFeng County,
        JiangXi, P.R.China 344500 | 13,150                              | 100%         
|Series A Preferred Stock, $.001 par value | All directors and executive officers as a group (one person)                                                                | 13,150                              | 100%         
|                                          |                                                                                                                             |                                     |              
|Series B Preferred Stock, $.001 par value | Chen, Quan Long
        Room 503,Building 53,QianXi District,DaDao Road, NanFeng County,
        JiangXi,P.R.China 344500   | 12,100,000                          | 100%         
|Series B Preferred Stock, $.001 par value | All directors and executive officers as a group (one person)                                                                | 12,100,000                          | 100%         
|                                          |                                                                                                                             |                                     |              
|Common Stock,
        $.001 par value     | Chen, Quan Long
        Room 503,Building 53,QianXi District,DaDao Road, NanFeng County,
        JiangXi,P.R.China 344500   | 665,416                             | 2%           
|                                          |                                                                                                                             |                                     |              
|Common Stock,
        $.001 par value     | Zhao, Li Li
        223 Xin Zhong St., Xin Jian, Jin Yun County, Zhe Jiang, P.R.China                                       | 20,846                              | **           
|Class A Common Stock                      | All directors and executive officers as a group (three persons)                                                             | 760,710                             | 2%           



** Represents less than 1%



(1)  Unless stated otherwise, the
business address for each person named is c/o China Fruits Corp.



(2)  Calculated pursuant to Rule
13d-3(d) (1) of the Securities Exchange Act of 1934. Under Rule 13d-3(d), shares not outstanding which are subject to options,
warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the
number and percentage owned by a person, but not deemed outstanding for the purpose of calculating the percentage owned by each
other person listed. We believe that each individual or entity named has sole investment and voting power with respect to the shares
of common stock indicated as beneficially owned by them (subject to community property laws where applicable) and except where
otherwise noted.



Changes in Control



None.



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ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE



None.



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES



Fees Billed For Audit and Non-Audit Services



The following table represents the aggregate
fees billed for professional audit services rendered to the independent auditor, Lake & Associates CPA’s LLC (“Lake”),
for our audit of the annual financial statements for the years ended December 31, 2009 and 2008. Audit fees and other fees of auditors
are listed as follows:



|Year Ended December 31             |  | 2009(2) |  | 2008(3) |        | 
|---------------------------------- |  | ------- |  | ------- | ------ | 
|                                   |  |         |  |         |        | 
|Audit Fees(1)                      |  | $66,000 |  | $       | 64,000 | 
|Audit-Related Fees (4)             |  | --      |  |         | --     | 
|Tax Fees (5)                       |  | --      |  |         | --     | 
|All Other Fees (6)                 |  | --      |  |         | --     | 
|Total Accounting Fees and Services |  | $66,000 |  | $       | 64,000 | 







| | (1) | Audit Fees. These are fees for professional services for the audit of our annual financial statements, and for the review of the financial statements included in our filings on Form 10-Q, and for services that are normally provided in connection with statutory and regulatory filings or engagements.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | The amounts shown in 2009 relate to (i) the audit of our annual financial statements for the fiscal year ended December 31, 2009, and (ii) the review of the financial statements included in our filings on Form 10-Q for the quarters of 2010.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | The amounts shown in 2008 relate to (i) the audit of our annual financial statements for the fiscal year ended December 31, 2008, and (ii) the review of the financial statements included in our filings on Form 10-Q for the quarters of 2009.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Audit-Related Fees. These are fees for the assurance and related services reasonably related to the performance of the audit or the review of our financial statements.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | Tax Fees. These are fees for professional services with respect to tax compliance, tax advice, and tax planning.
| | --- | ----------------------------------------------------------------------------------------------------------------



| | (6) | All Other Fees. These are fees for permissible work that does not fall within any of the other fee categories, i.e., Audit Fees, Audit-Related Fees, or Tax Fees.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------





Pre-Approval Policy for Audit and Non-Audit Services



We do not have a standing audit committee,
and the full Board performs all functions of an audit committee, including the pre-approval of all audit and non-audit services
before we engage an accountant. All of the services rendered to us by Lake & Associates CPA’s LLC were pre-approved by
our Board of Directors.



We are presently working with its legal counsel
to establish formal pre-approval policies and procedures for future engagements of our accountants. The new policies and procedures
will be detailed as to the particular service, will require that the Board or an audit committee thereof be informed of each service,
and will prohibit the delegation of pre-approval responsibilities to management. It is currently anticipated that our new policy
will provide (i) for an annual pre-approval, by the Board or audit committee, of all audit, audit-related and non-audit services
proposed to be rendered by the independent auditor for the fiscal year, as specifically described in the auditor's engagement letter,
and (ii) that additional engagements of the auditor, which were not approved in the annual pre-approval process, and engagements
that are anticipated to exceed previously approved thresholds, will be presented on a case-by-case basis, by the President or Controller,
for pre-approval by the Board or audit committee, before management engages the auditors for any such purposes. The new policy
and procedures may authorize the Board or audit committee to delegate, to one or more of its members, the authority to pre-approve
certain permitted services, provided that the estimated fee for any such service does not exceed a specified dollar amount
(to be determined). All pre-approvals shall be contingent on a finding, by the Board, audit committee, or delegate, as the case
may be, that the provision of the proposed services is compatible with the maintenance of the auditor's independence in the conduct
of its auditing functions. In no event shall any non-audit related service be approved that would result in the independent auditor
no longer being considered independent under the applicable rules and regulations of the Securities and Exchange Commission.



(a) On December 31,
2009, our Chief Executive Officer and Chief Financial Officer made an evaluation of our disclosure controls and procedures. In
our opinion, the disclosure controls and procedures are adequate because the systems of controls and procedures are designed to
assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are
recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition,
results of operations and cash flows for the respective periods being presented. Moreover, the evaluation did not reveal any significant
deficiencies or material weaknesses in our disclosure controls and procedures.



(b) There have been
no significant changes in our internal controls or in other factors that could significantly affect these controls since the last
evaluation.



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PART IV



ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES



|(a) | Financial Statements
|--- | --------------------



1. The following financial statements of China Fruits Corp. are
included in Part II, Item 8:



Report of Independent Registered Public Accounting Firm Balance
Sheet at December 31, 2009

Statements of Operations - for the
years ended December 31, 2009 and 2008

Statements of Cash Flows - for the years ended December 31, 2009
and 2008

Statements of Stockholders’
Equity - for the years ended December 31, 2009 and 2008

Notes to Financial Statements



2. Exhibits



14.1 Code of Ethics *

31.1. Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive
Officer

31.2. Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer

32.1. Section 1350 Certifications of Chief Executive Officer

32.2. Section 1350 Certifications of Chief Financial Officer



* Filed previously.



|(b) | Reports on Form 8-K
|--- | -------------------



(1) 	On May 20, 2009, we filed a current
report on Form 8-K to announce an Offshore Subscription Agreement with Ms. Ning, Fen in connection with a purchase of one million
and seven hundred fifty thousand shares (1,750,000) of restricted common stock of the Company.



(2) 	On June 12, 2009, we filed a current
report on Form 8-K to announce an Equipment and Inventory Sales Agreement with Nanfeng Huaxia Wuqiannian Ecological Wine Village
Ltd., a corporation organized and existing under the laws of the Peoples’ Republic of China to discontinue our alcoholic
beverage production business.



(3) 	On June 15, 2009, we filed an amendment
to current report on Form 8-K/A to amend the current report in Form 8-K filed on June 12, 2009.



(4)	On August 24, 2009, we filed a current
report on Form 8-K to announce that Mr. Wang Zhi Xiong resigned as Chief Financial Officer and the appointment by the Board of
Directors of Mr. Wang, Yongcheng as Chief Financial Officer, effective immediately.



(45)


Table of Contents






SIGNATURES



In accordance with Section 13 or 15(d)
of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned majority
of the Board of Directors, thereunto duly authorized.





|                     |  | China Fruits Corporation
|-------------------- |  | ------------------------
|                     | 
|Date: April 29, 2011 |  | /s/ Chen, Quan Long     
|                     |  | Chen, Quan Long         
|                     |  | President               







Exhibits



14.1 Code of Ethics *

31.1.Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer

31.2.Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer

32.1.Section 1350 Certifications of Chief Executive Officer

32.2.Section 1350 Certifications of Chief Financial Officer



*Previously Filed